Applied Economics vs. Financial Economics: Which is Right for You?

Published January 11, 2024

Data points illustrated in a graph.If you are exploring the possibility of pursuing a graduate degree in economics, you might be weighing the benefits of a master’s in applied economics versus a master’s in financial economics. Your best path will depend on your career aspirations, the skills and knowledge you would like to acquire, and your personal and professional goals.

Read on to learn more about each field, how master’s degree programs differ, and where they overlap.

What is Applied Economics?

Applied economics connects theoretical economic concepts to their practical use in real-world situations. Instead of remaining in the realm of abstract ideas, applied economics focuses on how these theories can be implemented in actual scenarios, applying foundational economic theories in specific contexts to make informed decisions and predict potential outcomes.

What is Financial Economics?

Financial economics studies how people, businesses, and organizations handle their money. This field looks at how people invest, deal with risks, and determine the worth of assets like stocks and bonds, seeking to understand how financial markets work. Financial economics is crucial for businesses, helping them decide how to invest, fund their operations, and distribute profits.

How is Applied Economics Different From Financial Economics?

While applied economics and financial economics share common ground, they do have some distinct differences. Below is an overview comparing the key topics, tools, and applications of each sector and exploring areas of overlap.

Applied Economics

  • Key Topics: Labor, health, environment, trade, regional and urban, macro and monetary, forecasting
  • Tools: Various tools, from descriptive statistics to complex econometric models; often uses tools to analyze large datasets to derive insights about economic phenomena
  • Applications: Can be used to inform public policy decisions, evaluate the impact of economic policies, or understand the economic implications of specific events or trends

Financial Economics

  • Key Topics: Asset valuation, market efficiency, behavioral finance, and corporate finance
  • Tools: Relies on mathematical models and quantitative techniques to understand financial markets and instruments; tools like multivariate optimization and time series analysis are commonly used
  • Applications: Asset valuation, risk assessment, and portfolio optimization

Areas of Overlap

Applied economics and financial economics, while distinct in their primary focus, share several areas of intersection. Both disciplines are rooted in the practical application of economic theories, often set against the backdrop of real-world scenarios. For instance, topics like public finance, investment policy, and economic development frequently draw insights from both fields.

Applied and financial economics both employ data analysis, modeling, and other empirical techniques to understand and predict economic behaviors.

Comparing Courses of Study

Generally speaking, a master’s in applied economics program offers a comprehensive blend of business and social science disciplines. Topics covered can range from environmental and financial economics to health economics, international economics and development, spatial economics, and public policy.

A master’s in financial economics, on the other hand, primarily centers on the intricacies of financial markets, instruments, and institutions. Students delve into topics such as asset valuation, investment strategies, risk management, and the underlying behaviors of financial markets. Read “What to Know About Pursuing a Master’s in Financial Economics” to learn more about this degree.

Jobs Compatible With Both Degrees

Economist

The role of economist is equally suited for both applied and financial economics as studying economic patterns and trends is foundational in both sectors.

  • General Function: Collect and analyze data, research trends, and evaluate economic issues for resource allocation. Economists study the production and distribution of resources, goods, and services.
  • Median Salary: $114,262
  • Job Growth: 0.64%

Data Scientist

The role of data scientist is more aligned with applied economics due to the broader range of data sources and applications, but the quantitative skills used in financial economics can also be beneficial.

  • General Function: Use scientific methods, algorithms, and systems to extract insights and knowledge from structured and unstructured data; may use advanced statistical techniques to solve complex problems and predict future trends.
  • Median Salary: $102,805
  • Job Growth: 2.0%

Statistician

The role of statistician is equally suited for both applied and financial economics as it deals with data analysis, which is crucial in both fields.

  • General Function: Design surveys, experiments, and opinion polls, collecting and interpreting data using mathematical and statistical techniques to make informed decisions.
  • Median Salary: $98,189
  • Job Growth: 1.8%

Operations Research Analyst

While operations research analysts use mathematical methods that are foundational in financial economics, their broader problem-solving approach makes them equally suited for applied economics.

  • General Function: Use advanced mathematical and analytical methods to help organizations solve problems and make better decisions; may work on logistics, scheduling, or supply chain challenges.
  • Median Salary: $85,701
  • Job Growth: 1.39%

Economics Instructor, Postsecondary

Teaching jobs are equally suited for financial and applied economics, as they can involve a range of economic topics, from applied subjects to financial theories.

  • General Function: Teach economics courses at the college or university level; may engage in research, publish findings, and guide students in understanding economic theories and applications.
  • Median Salary: $79,219
  • Job Outlook: 1.26%

Industry, occupation, compensation, and projected growth data are supplied by Lightcast. Johns Hopkins University cannot guarantee employment placement, salary level, or career advancement.

Earn Your Master’s Degree With JHU AAP

Johns Hopkins University’s MS in Applied Economics and MS in Financial Economics programs are flexibly designed to meet the needs of working professionals, with options to study in person in Washington, D.C., or online.

Contact us today to learn more about how you can advance your career and pursue your personal and professional goals with a master’s degree from Johns Hopkins.

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