nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2011‒03‒26
nineteen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Task-Biased Changes of Employment and Remuneration: The Case of Occupations By Stephan Kampelmann; Francois Rycx
  2. Factor Content of Intra-European Trade Flows By Götz Zeddies
  3. Distributional costs of the housing-price bust By Cynthia A. Bansa; Martha A. Starr
  4. Rising Inequality and the Financial Crises of 1929 and 2008 By Jon D. Wisman; Barton Baker
  5. Contributions of economists to the housing-price bubble By Martha A. Starr
  6. Job Satisfaction in a Developing Country: Exploring the Work-Family Rivalry By Luis Fernando Gamboa; Andrés García-Suaza; Mauricio Rodríguez-Acosta
  7. Gender Differences, HIV Risk Perception and Condom Use By Judith Lammers; Sweder van Wijnbergen; Daan Willebrands
  8. Gender and Occupational Mobility in Urban China during the Economic Transition By Yueping Song; Xiao-Yuan Dong
  9. Economic Transition and the Motherhood Wage Penalty in Urban China: Investigation using Panel Data By Nan Jia; Xiao-Yuan Dong
  10. Wage and Price Setting Behaviour of Lithuanian Firms By Ernestas Virbickas
  11. Cost Innovation: Schumpeter and Equilibrium - Part 1: Robinson Crusoe By Martin Shubik; William D. Sudderth
  12. Who has been affected, how and why? The spillover of the global financial crisis to Sub-Saharan Africa and ways to recovery By Sophie Chauvin; André Geis
  13. Market Regulation and Firm Performance: The Case of Smoking Bans in the UK By Jerome Adda; Samuel Berlinski; V. Bhaskar; Stephen Machin
  14. Economic Doctrines and Approaches to Climate Change Policy By Atkinson, Robert D.; Hackler, Darrene
  15. Kaleckian vs. Marxian specifications of the investment function: Some empirical evidence for the US By Schoder, Christian
  16. Shrinking Goods and Sticky Prices: Theory and Evidence By Snir, Avichai; Levy, Daniel
  17. The Long Term Impacts of Migration in British Cities: Diversity, Wages, Employment and Prices By Nathan, Max
  18. Social Provisioning Process and Socio-Economic Modeling By Jo, Tae-Hee
  19. A Human Development Index at the Household Level By Kenneth Harttgen; Stephan Klasen

  1. By: Stephan Kampelmann; Francois Rycx
    Abstract: Different empirical studies suggest that the structure of employment in the U.S. and Great Britain tends to polarise into "good" and "bad" jobs. We provide updated evidence that polarisation also occurred in Germany since the mid-1980s until 2008. Using representative panel data, we show that this trend corresponds to a task bias in employment changes: routine jobs have lost relative employment, especially in predominantly manual occupations. We further provide the first direct test for whether task-biased technological change affects employment and remuneration in the same direction and conclude that there is no consistent task bias in the evolution of pay rules. By contrast, compositional changes like the proportion of union members are clearly associated with long-term changes in the remuneration of occupations.
    Keywords: Polarisation, technological change, pay rules, occupations, inequality, tasks
    JEL: J21 J24 J31
    Date: 2011
  2. By: Götz Zeddies
    Abstract: In recent decades, the international division of labor expanded rapidly in course of globalization. In this context, highly developed countries specialized on (human) capital intensively manufactured goods and increasingly sourced parts and components from lowwage countries. Since this should be beneficial for the high-skilled and harmful for the lower qualified workforce, especially the opening up of Eastern Europe and the international integration of newly industrializing Asian economies are considered as main reasons for increasing unemployment of the lower qualified in high-wage countries. The present paper addresses this issue for selected Western European countries by analyzing factor content of trade, which allows inferring on factor demand patterns resulting from international trade. This is not only done for countries’ total external trade, but also for bilateral trade flows, using input-output analyses. Thereby, differences in factor inputs and production technologies are considered, allowing for product differentiation. According to the results, factor content of bilateral trade flows between Western European high-wage countries does hardly differ. However, the results are different for East-West trade, since exports from Western to Eastern Europe are distinctly more human capital intensively manufactured than imports of Western European high-wage countries from Eastern Europe.
    Keywords: European integration, international trade, labor markets, input-output analysis
    JEL: C67 F11 F15 F16
    Date: 2011–03
  3. By: Cynthia A. Bansa; Martha A. Starr
    Abstract: In considering whether asset-price bubbles should be offset through policy, an important issue is who pays the price when the bubble bursts. A bust that reduces the wealth of well-off households only may have small welfare costs, but costs may be sizable if broad swaths of households are affected. This paper uses micro data from the American Community Survey to examine how the recent housing bust affected households' employment, homeownership, home values, and housing costs. To separate dynamics of the housing bust from those of the aggregate downturn, we differentiate between metropolitan areas that did and did not experience bubbles. We find that, for most measures, deteriorations in well-being were more severe in bubble metros than elsewhere, and for several measures, differential effects on less-educated households were also more severe. This underscores the importance of keeping housing markets from overheating, as burdens of adjustment fall differentially on people not well prepared to bear them.
    Keywords: JEL classification: R21, D31, D12, E32
    Date: 2011–03
  4. By: Jon D. Wisman; Barton Baker
    Abstract: The most widely embraced explanations of the financial crisis of 2008 have centered upon inadequate regulation stemming from laissez-faire ideology, combined with low interest rates. Although these widely-acknowledged causal factors are true, beneath them lies a deeper determining force that has received less notice: the dramatic increase in inequality in the U.S. over the preceding 35 years. Heightened inequality generated three dynamics that made the economy vulnerable to systemic dysfunction. The first is that inequality constrained consumption, reducing profitable investment potential in the real economy, and thereby encouraging an every wealthier elite to flood financial markets with credit, helping keep interest rates low, encouraging the creation of new credit instruments, and fueling speculation. The second dynamic is that greater inequality meant that individuals were forced to struggle harder to find ways to consume more to maintain their relative social status. The consequence was that over the preceding three decades household saving rates plummeted, households took on evergreater debt, and workers worked longer hours. The third dynamic is that, as the rich took larger shares of income and wealth, they gained more command over ideology and hence politics. Reducing the size of government, cutting taxes on the rich and reducing welfare for the poor, deregulating the economy, and failing to regulate newly evolving credit instruments flowed out of this ideology.
    Keywords: Underconsumption, deregulation, speculation, real estate boom, credit, conspicuous consumption, social respectability
    Date: 2011–01
  5. By: Martha A. Starr
    Abstract: After the bursting of the housing-price bubble in 2006 and ensuing financial crisis, there has been much discussion of what economists could have done differently to help avert the crisis and "Great Recession" that followed. One dimension of this concerns information supplied by economists to the general public about causes of high appreciation in home prices and their likely future course, as good information could have helped the public hedge their finances against downside risks while bad information may have encouraged them to take on too much risk. This paper analyzes data from 24 California newspapers on assessments and predictions offered by economists as to whether bubbles were forming in the state's housing markets. In brief, we find that the California public was fairly decently served by economists offering their views via the media -- although with some significant problems of biased forecasts not made in good faith, and of inattention to concerns about "harm avoidance" that ought to apply when economists share their opinions in this way.
    Keywords: JEL classification: R21, D31, D12, E32
    Date: 2011–03
  6. By: Luis Fernando Gamboa; Andrés García-Suaza; Mauricio Rodríguez-Acosta
    Abstract: This paper empirically analyzes the relationship between familiar duties and job satisfaction in a developing country by using four different indexes. This analysis includes objective measures and subjective measures from data gathered in Colombia. In contrast to previous literature, objective measures are included through the interactive effects between the family responsibilities variables and the gender. Subjective measures are evaluated using the job-family compatibility perception. Our findings show that women tend to be less satisfied at work as the number of children increases, while men are more prone to satisfaction at work when they are single thus showing the importance given to the use of their own time. It also reveals that jobfamily compatibility is an important determinant of job satisfaction.
    Date: 2011–02–28
  7. By: Judith Lammers (University of Amsterdam); Sweder van Wijnbergen (University of Amsterdam); Daan Willebrands (Amsterdam Institute for International Development (AIID))
    Abstract: We analyze how HIV-knowledge influences condom use across the sexes. The empirical work is based on a household survey conducted among 1,979 households of a representative group of market persons in Lagos in 2008. Last-time-condom-use is analyzed based on a Probit model while correcting for clustering effects. Next to socioeconomic characteristics, the data includes questions on knowledge of the existence of HIV, HIV prevention, HIV stigma, intended pregnancy, and risk perceptions of engaging in unprotected sex. We observe a large HIV knowledge gap between males and females. Moreover, across the sexes different type of knowledge are important in condom use. Low risk perceptions of engaging in unprotected sex and not knowing that condoms prevent HIV infection appear to be the best predictors for risky sexual behavior among men. The latter is also important in condom use among single females. Both factors, however, do not explain sexual behavior of married women, suggesting a lack of bargaining power in HIV prevention decisions among married females. Our results call for programmatic approaches to differentiate the focus of HIV prevention campaigns for males and females including a separate focus for married men and women. Moreover, the large predictive power of high-risk perceptions of engaging in unprotected sex (while correcting for other HIV knowledge indicators) calls for further exploration of influencing these risk perceptions in HIV prevention programs.
    Keywords: prevention; knowledge; HIV/AIDS; risk perception; gender; condom use
    JEL: I1 I2
    Date: 2011–03–11
  8. By: Yueping Song; Xiao-Yuan Dong
    Abstract: This paper examines the gender patterns of occupational mobility in post-reform Urban China using a national representative dataset. The results reveal marked differences between married men and women: women are more likely than men to undergo lateral or downward occupational changes, but are less likely to experience upward mobility. The results also show that the public-sector restructuring has increased the incidence of downward occupational mobility, more for women than men. The analysis suggests that women are disadvantaged in the occupational mobility process by a variety of social and institutional factors.
    Keywords: Occupational mobility, Gender, Economic transition, Social networks
    JEL: J16 J63 C25 R20
    Date: 2011–01
  9. By: Nan Jia; Xiao-Yuan Dong
    Abstract: China’s economic transition has fundamentally changed the mechanisms for allocating and compensating labor. This paper investigates how the economic transition has affected the wage gap between mothers and childless women in urban China using panel data for the period 1990-2005. The results show that overall, mothers earned considerably less than childless women; additionally, the wage penalties for motherhood went up substantially from the gradualist reform period (1990-1996) to the radical reform period (1999-2005). The results also show that that although motherhood does not appear to have a significant wage effect for the state sector, it imposes substantial wage losses for mothers in the non-state sector. These findings suggest that the economic transition has shifted part of the cost of child-bearing and -rearing from the state and employers back to women in the form of lower earnings for working mothers.
    JEL: J13 J31 O10 R20
    Date: 2011–01
  10. By: Ernestas Virbickas (Bank of Lithuania)
    Abstract: This paper investigates the wage and price setting behaviour of Lithuanian firms on the basis of an ad hoc survey “On Price and Wage Setting” undertaken by the Bank of Lithuania. The paper provides survey evidence on the frequency of wage and price changes. The frequency of wage changes turns out to be higher in firms that apply collective pay agreements, while the frequency of price changes appears to be positively affected by the market competition. Labour cost share is not found to be significant in making the impact on the frequency of price changes. This paper also investigates the role of certain technological, institutional and other factors in shaping firms’ responses to a negative demand shock, an intermediate input cost shock and a wage shock. A higher labour cost share is found to increase the likelihood of a price increase following a wage shock. Flexible wage components mitigate firms’ responses to a slowdown in demand and an intermediate input cost increase. The behaviour of firms following the investigated shocks is also affected by the level of competition. The role of collective pay agreements appears to be rather limited in shaping responses of firms to the shocks.
    Keywords: wage setting, price setting, labour costs
    JEL: D40 J30
    Date: 2010–07–16
  11. By: Martin Shubik; William D. Sudderth
    Date: 2011–03–20
  12. By: Sophie Chauvin (Banque de France, DAMEP, 31 rue Croix des Petits Champs, 75049 Paris Cedex, France.); André Geis (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main)
    Abstract: This paper first presents a comprehensive analysis of the significance of different transmission channels of the global economic and financial crisis to Sub-Saharan African countries. It then examines the repercussions of the crisis for the growth of gross domestic product (GDP) and its components; this is complemented by a study of the responses of monetary and fiscal authorities to the challenges posed by the crisis, both in regional terms and on the basis of selected country case studies. Finally, the paper highlights medium-term to long-term challenges for ensuring a sustainable recovery and for fostering resilience against potential future shocks.The authors find that the intensity of the impact of the crisis varies widely across countries, with a lack of export diversification apparently having been particularly conducive to its transmission. However, the analysis of the magnitude of the observed swings in macroeconomic variables also reveals that although they were large, they were not exceptional and are comparable to fluctuations Sub-Saharan Africa has witnessed in the recent past. Furthermore, in a non-negligible number of instances the extent of the slowdown seems to have been determined by domestic factors as well. Particularly, policies and conditions prior to the global recession, rather than crisis contagion per se, appear decisively to have shaped the scope of possible responses in many cases. As a result, many of the policy lessons Sub-Saharan Africa might draw from the crisis do not involve radical deviation from the policies in place before. Efforts to improve the management of resource revenue for commodity-dependent countries, necessary reforms of the economic and business environment to enable a diversification of the export base, and further regional integration might help to alleviate possible future external shocks. Additionally, the crisis re-emphasises the need to back growth prospects by redefining sectoral priorities, for example by concentrating on infrastructure and agricultural supply. Lastly, new challenges in the wake of the crisis may call for a re-focusing of policy initiatives, e.g. to address an emergence of potential financing constraints for aid-dependent economies or the exposure of domestic financial sectors to systemic shock. JEL Classification: R11, E60, F30, O10
    Keywords: Regional growth, Sub-Saharan Africa, balance of payments, global economic crisis, international spillovers.
    Date: 2011–03
  13. By: Jerome Adda; Samuel Berlinski; V. Bhaskar; Stephen Machin
    Abstract: This paper analyzes the effects of a ban on smoking in public places upon firms and consumers. Analysis of survey data from public houses finds that the Scottish smoking ban (introduced in March 2006) reduced pub sales and harmed medium run profitability. An event study analysis of the stock market performance of pub-holding companies corroborates the negative effects of the smoking ban on firm performance. We develop a model of public good provision by firms to offer an interpretation of these findings. In the context of smoking, the public good aspect and consumer heterogeneity in preferences regarding smoking appear to be central to the problem. The model allows us to examine the appropriate form of optimal regulation and to study the welfare effect of a smoking ban. The optimal policy response ensures that some pubs be permitted to allow smoking while others are not.
    Keywords: regulation; smoking ban; market provision of quality; sales; prices; profitability; stock market performance
    JEL: I18 H23 L51 L81
    Date: 2011
  14. By: Atkinson, Robert D.; Hackler, Darrene
    Abstract: In climate change, as in all policy issues, economic philosophy has a significant influence on how people view both the problems and the solutions. For the first time, ITIF surveys four dominant schools of economic thought and analyzes how adherents approach policy options for climate change and energy policy. With climate change and major energy legislation stalled, maybe it is time to put aside fixed philosophical notions and take a practical look on ways to address climate change in an economically feasible way. The report reviews the principles and goals of each economic doctrine, and offers a critique of the advantages and limitations of each doctrine's contribution to addressing the challenge of climate change.
    Keywords: Innovation; Economics; Climate Change; Public Policy
    JEL: B50 A10 Q54
    Date: 2010–10
  15. By: Schoder, Christian
    Abstract: Following Lavoie et al. (2004), this paper empirically assesses four investment functions closing the Kaleckian baseline model in the long-run: (a) the Naive-Kaleckian specification without any long-run adjustment; (b) the Intermediate-Kaleckian specification with an endogenous adjustment of the normal utilization rate; (c) the Hysteresis-Kaleckian specification with an additional endogenous adjustment of autonomous investment; and (d) the French-Marxian specification with an exogenous normal utilization rate and endogenous autonomous investment. Confronting these specifications with data of the US manufacturing sector, we compare them with respect to the plausibility of the parameter estimates, the goodness of fit, the parameter stability, the out-of-sample performances and relative encompassing. We find the Intermediate-Kaleckian specification to be superior. For the Hysteresis-Kaleckian specification, we get implausible results which contradict Lavoie et al. (2004). Yet, their estimates seem to be biased due to endogeneity issues.
    Keywords: Kaleckian growth model; Marxian growth model; investment functions; post-Keynesian economics
    JEL: E12 E22 E11
    Date: 2011
  16. By: Snir, Avichai; Levy, Daniel
    Abstract: If producers have more information than consumers about goods’ attributes, then they may use non-price (rather than price) adjustment mechanisms and, consequently, the market may reach a new equilibrium even if prices remain sticky. We study a situation where producers adjust the quantity (per package) rather than the price in response to changes in market conditions. Although consumers should be indifferent between equivalent changes in goods' prices and quantities, empirical evidence suggests that consumers often respond differently to price changes and equivalent quantity changes. We offer a possible explanation for this puzzle by constructing and empirically testing a model in which consumers incur cognitive costs when processing goods’ price and quantity information. The model is based on evidence from cognitive psychology and explains consumers’ decision whether or not to process goods’ price and quantity information. Our findings explain why producers sometimes adjust goods’ prices and sometimes goods’ quantities. In addition, they predict variability in price adjustment costs over time and across economic conditions.
    Keywords: Sticky Prices; Rigid Prices; Cognitive Costs of Attention; Information Processing Cost; Rational Inattention; Price Adjustment; Quantity Adjustment; Downsizing;
    JEL: D21 L11 D11 E31 D40 L00 L16 M31 L15 M21
    Date: 2011–03–13
  17. By: Nathan, Max
    Abstract: British cities are becoming more culturally diverse, with migration a main driver. Is this growing diversity good for urban economies? This paper explores, using a new 16-year panel of UK cities. Over time, net migration affects both local labour markets and the wider economy. Average labour market impacts appear neutral. Dynamic effects may be positive on UK-born workers’ productivity and wages (via production complementarities for higher skill workers) or negative on employment (if migrants progressively displace lower-skill natives from specific sectors). The results, which survive causality checks, suggest both processes are operating in British cities. Long-term industrial decline and casualisation of entry-level jobs help explain the employment findings.
    Keywords: cities; migration; cultural diversity; labour markets; productivity; urban economics
    JEL: O18 J61 J15 R11 D24 R23
    Date: 2011–02–15
  18. By: Jo, Tae-Hee
    Abstract: The radical difference between orthodox and heterodox economics emanates from the different views of the capitalist socio-economic system. Economics as the science of social provisioning felicitously describes the heterodox view that economy is part of the evolving social order; social agency is embedded in the social and cultural context; a socio-economic change is driven by technical and cultural changes; and the provisioning process is open-ended. Such a perspective on economy offers ample methodological and theoretical implications for modeling the capitalist economy in a realistic manner. It lends itself especially to the micro-macro synthetic approach. Thus the objective of this paper is twofold: 1) to examine how the concept of the social provisioning process can be clarified and expanded by virtue of recent development in heterodox methodology and 2) to discuss how methodological development would nourish the heterodox modeling and theorizing of the capitalist social provisioning process.
    Keywords: Social Provisioning; heterodox economics; social fabric matrix; system dynamics; social surplus approach
    JEL: B51 B52 B41
    Date: 2011–03–15
  19. By: Kenneth Harttgen (Georg-August-University Göttingen); Stephan Klasen (Georg-August-University Göttingen)
    Abstract: One of the most serious weaknesses of the human development index (HDI) is does not take into account the distribution of human development within a country. All previous attempts to capture inequality in the HDI have also used aggregate information and there exists no HDI at the household level. We provide a method for proxying the HDI at the household level. This allows the analysis of the HDI by any kind of population subgroups and by household socioeconomic characteristics as well as to apply any kind of inequality measure across population subgroups and over time. We illustrate our approach for 15 developing countries. Inequality in the HDI is stunningly large for some countries, driven mostly by very high inequality in the education and income components of the HDI. The inequality in human development is larger than previously reported which is largely due to the new procedures for calculating the HDI used in the 2010 Human Development Report. Inequality in the HDI is largest in poorer countries, particularly in Sub-Saharan Africa.
    Keywords: Human Development Index; Income Inequality; Differential Mortality; Inequality in Education
    Date: 2011–03–17

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