nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2011‒04‒23
eighteen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Medical Expenditure Growth and the Diffusion of Medical Technology By Justin Polchlopek
  2. Thorstein Veblen: A Marxist Starting Point By Kirsten Ford and William McColloch
  3. Quel projet pour l'économie sociale ? By Alain Leroux
  4. Women and Power: Unwilling, Ineffective, or Held Back? By Casas-Arce, Pablo; Saiz, Albert
  5. Consistency in Organization (updated) By Schlicht, Ekkehart
  6. Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals? By Granlund, David; Köksal , Miyase Yesim
  7. Wissenschaftlicher Fortschritt in den Wirtschaftswissenschaften: Einige Bemerkungen By Gebhard Kirchgässner
  8. Goldilocks and the Three Electricity Prices: Are Irish Prices "Just Right"? By Devitt, Conor; Diffney, Seán; Fitz Gerald, John; Malaguzzi Valeri, Laura; Tuohy, Aidan
  9. Gesellschaftswissenschaftliche Ideale - 'Gute Gesellschaften' bei Hayek, Nozick, Marx und Keynes By Heise, Arne
  10. Consumer Preferences for 99-ending prices: the mediating role of price consciousness By Charlotte Gaston-Breton
  11. How Effective is European Merger Control? By Tomaso Duso; Klaus Gugler; Burcin B. Yurtoglu
  12. Unemployment Insurance and Low-Educated Single Working Mothers Before and After Welfare Reform By H. Luke Shaefer; Liyun Wu
  13. A multi-sector version of the Post-Keynesian growth model By Araujo, Ricardo Azevedo; Teixeira, Joanílio Rodolpho
  14. Wage-profit curves of the Finnish economy: evidence from the supply and use tables By Soklis, George
  15. A Conceptual Model of National Skills Formation for Knowledge-based Economic Development By Schwalje, Wes
  16. Wassily Leontief and Léon Walras: the Production as a Circular Flow By Akhabbar, Amanar; Lallement, Jérôme
  17. « Appliquer la théorie économique de l’équilibre général » : de Walras à Leontief By Akhabbar, Amanar; Lallement, Jerôme
  18. Access to water in a Nairobi slum: women’s work and institutional learning By Crow, Ben D; Odaba, Edmond

  1. By: Justin Polchlopek
    Abstract: The general consensus among health economists is that the increasing capability of medical providers— often called medical “technology”—is responsible for the majority of growth in medical expenditure. And yet, the principle means of understanding medical technology is through the use of total factor productivity, which, despite giving reasonable estimates of the magnitude of the effects, is not a theory of technology, leaving policymakers without effective tools for prediction. This paper develops a descriptive model of technology that may have interesting implications for health economics. The model suggests that the manner of diffusion of technology is critical, and when technology diffuses haphazardly, the effects on expenditure can be unexpectedly large.
    Keywords: Health Economics, Health Care Production, National Health Expenditures, Sraffian Economics, Total Factor Productivity, Input-Output Economics, Technological Diffusion Processes JEL Codes: B51, C67, D24, D57, I11, I12, O33
    Date: 2011
  2. By: Kirsten Ford and William McColloch
    Abstract: As existing literature attests, in spite of methodological differences Marx and Veblen draw strikingly similar conclusions regarding production, conflict, and alienation in modern existence. We here attempt to establish that similarity in conclusion stems from similarity in approach. After reviewing the existing literature on a Marx-Veblen methodological reconciliation, we recapitulate Marx’s method, making the mediated starting point the locus of discussion.From this vantage point, we then examine Veblen’s own approach to analysis in “The Theory of Business Enterprise” and the conclusions that emerge as they resemble those of Marx. In taking a kindred approach Veblen is able to arrive at an understanding of capitalism in accordance with, and complementary to, Marx’s rendering of the inverted nature of economic life in modernity.
    Keywords: Marxism, Institutionalism, History of Economic Thought: Individuals, Economic Methodology: General JEL Codes: B140, B150, B300, B400
    Date: 2011
  3. By: Alain Leroux (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: Par tradition militante, mêlée à un vieux fond de culture marxiste, les défenseurs et promoteurs de l' "économie sociale" la présentent volontiers comme " une alternative au capitalisme " ! Pour rendre leur perspective crédible et montrer que la relève du "mode de production dominant " est en marche, ils ne craignent pas d'affronter la dure réalité comptable, qui donne au secteur capitaliste un poids sept fois plus élevé que celui reconnu à l' "économie sociale", dans la production des richesses (le PIB). Cette façon de militer en faveur de l' "économie sociale" est ce que nous appelons la stratégie du modèle. Autant le dire tout de suite, cette stratégie nous paraît à la fois erronée dans ses tenants et contre-productive dans ses aboutissants. Erronée, car ce qui est fondamentalement en cause n'est pas tant le capitalisme que le système de valeurs qui l'instrumentalise : l'idéologie néo-libérale. Contre-productive, parce que l' "économie sociale" peut jouer un rôle crucial dans l'émergence de la société de demain, mais à la condition expresse de l'utiliser à bon escient : en démontrant qu'il est possible d' "entreprendre autrement ", l' "économie sociale" nous aide à comprendre qu'il est certainement possible de vivre notre société différemment. C'est ce que nous appelons la stratégie de l'exemple.
    Keywords: économie sociale ; idéologie ; capitalisme ; néo-libéralisme ; Hayek ; Polanyi
    Date: 2011–04–12
  4. By: Casas-Arce, Pablo (Universitat Pompeu Fabra); Saiz, Albert (Wharton School, University of Pennsylvania)
    Abstract: We develop a model that nests previous explanations for women under-representation in positions of power. Focusing on democratic electoral dynamics, our framework delineates the three types of mechanisms that may be at play: consumer demand, candidate supply, and internal party dynamics beyond electoral markets. We use Spain's Equality Law, requiring a 40 percent female quota in electoral lists, to test the alternative theories. The law was enacted by the social-democratic party after the surprise parliamentary electoral results following the Madrid terrorist bombings, and was therefore completely unexpected by regional political machines. The law only applied to towns with populations above 5000, so we can use a treatment-control, before-and-after discontinuity design to learn about the impact of female politicians in local elections. Our evidence is most consistent with the existence of entrenched male-dominated political machines capturing influential power positions within the parties.
    Keywords: female political representation
    JEL: J16 J71
    Date: 2011–04
  5. By: Schlicht, Ekkehart (University of Munich)
    Abstract: Internal organization relies heavily on psychological consistency requirements. This thought has been emphasized in modern compensation theory, but has not been extended to organization theory. The perspective sheds new light on several topics in the theory of the firm, like the boundaries of the firm, the importance of fairness concerns within firms, the attenuation of incentives, or the role of routines and incentives. It implies a perceptional theory of the firm that is realistic in the sense advocated by Ronald Coase (1937).
    Keywords: theory of the firm, hierarchy, evolutionary theory of the firm, perceptional theory of the firm, consistency, small numbers, centralization paradox, Williamson’s puzzle, compensation, boundaries of the firm, fairness, idiosyncratic exchange, entitlements, obligations, routines, framing, Simon, employment relationship, fairness, ownership effect, skunkworks, disruptive technologies, Tayloristic organization, holistic organization
    JEL: B52 D02 L2
    Date: 2011–04
  6. By: Granlund, David (Department of Economics, Umeå University); Köksal , Miyase Yesim (Department of Economics, School of Business, Economics and Law)
    Abstract: What has been the effect of competition from parallel imports on prices of locally-sourced on-patent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all on-patent prescription drugs sold in Sweden during the 40 months from January 2001 through April 2004. On average, facing competition from parallel imports caused a 15-17% fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9%. The reform, however, did increase the effect of therapeutic competition by 1.6%.
    Keywords: parallel imports; pharmaceutical drugs; price competition; reference pricing; therapeutic competition
    JEL: I11 L51 L65
    Date: 2011–04–13
  7. By: Gebhard Kirchgässner
    Abstract: First, the points of view of economists regarding falsificationism, scientific revolutions and scientific research programmes are discussed. Next, hardly debatable scientific progress regarding empirical economic research in recent decades is described. Then it is asked whether there have been scientific revolutions with respect to economic theory or the basic methodology of the economic approach. Taking this term seriously, there have been at best two revolutions since the time of ADAM SMITH. Today, economists share a common paradigm, which also builds the hard core of their scientific research programme. But while this hard core is hardly questioned, the safety belt is discussed the more. Nevertheless, most today’s economic research can be considered as being ‘normal science’. Even if this kind of research is not without problems, there is no reason to assess it as being of secondary value.
    Keywords: Paradigm; normal science; methodology of scientific research programmes; empirical economic research
    JEL: B10 B41
    Date: 2011–04
  8. By: Devitt, Conor; Diffney, Seán; Fitz Gerald, John; Malaguzzi Valeri, Laura; Tuohy, Aidan
    Abstract: In this paper we analyse the 2008 electricity price in the Irish All-Island Market. We test whether this price is 'efficient' by comparing it to the electricity price in Great Britain. This analysis suggests that around ?16 per MWh of the difference in wholesale prices between Ireland and Britain is due to differences in generating technology. The new wholesale electricity market for the island of Ireland appears to be working well ? it is producing a wholesale price that approximates the long run marginal cost that would apply in a large liquid competitive market. In the British market the wholesale price appears to be below the long run marginal cost of producing electricity. Retail margins in Great Britain are high, especially for households. Only some of this margin compensates vertically integrated utilities for the low wholesale price. In the Republic of Ireland the retail margin was probably also higher than it should have been.
    Keywords: electricity/Ireland/cost/Republic of Ireland
    Date: 2011–02
  9. By: Heise, Arne
    Abstract: --
    Date: 2011
  10. By: Charlotte Gaston-Breton
    Abstract: This research addresses the persuasive effect of 99-ending prices and carries out a choice-based conjoint analysis among 318 shoppers. We propose that 99-ending prone consumers engage in a heuristic process either consciously — they consider a 99-ending as a signal for a “good deal”— or unconsciously — they round down 99-ending prices. This conceptual framework leads to non-intuitive and completely new sets of hypotheses in the examination of the drivers, mediator and moderators of 99-ending preferences. Results indicate that consumers who are more price conscious are more likely to choose 99-ending prices. Indeed, low involved shoppers (especially those with a low hedonic and symbolic involvement profile), low educated, low income and younger shoppers are prone to choose the 99-ending option. We also demonstrate that the magnitude of this 99-ending effect depends on the price level of the product category and the positioning of the brands. The theoretical contributions to the manner in which consumers process 99-endings has implications for retailers, pricing managers and social welfare
    Keywords: 99-ending prices, Price information processing, Conjoint analysis
    Date: 2011–04
  11. By: Tomaso Duso (Duesseldorf Institute for Competition Economics (DICE)); Klaus Gugler (Vienna University of Economics and Business); Burcin B. Yurtoglu (WHU - Otto Beisheim School of Management)
    Abstract: This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events’ competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger’s announcement. On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time.
    Keywords: Merger Control, Remedies, European Commission, Event Studies
    JEL: L4 K21 G34 C2 L2
    Date: 2011–04
  12. By: H. Luke Shaefer (University of Michigan); Liyun Wu (University of Michigan)
    Abstract: Using the Survey of Income and Program Participation (SIPP), a nationally representative, longitudinal survey, this study examines changing levels of Unemployment Insurance (UI) eligibility and benefit receipt among working low-educated single mothers, 1990–2005. It also examines changing participation in cash welfare and the Food Stamp Program (FSP). Relative to single childless women, there has been no increase in UI benefit receipt among single mothers entering a spell of unemployment in the postreform period, even though single mothers have increased their relative rates of UI eligibility. Because of declining cash assistance receipt, UI became a more common income support than cash assistance for this population during the period 2001–2005. Furthermore, the probability of accessing FSP for low-educated single mothers entering a spell of unemployment increased in the years 2001–2005. As a result, the proportion of this population accessing benefits from one or more of these programs remained virtually unchanged across the study period.
    Keywords: Welfare Reform, Unemployment Insurance, Low-educated Single Mothers
    JEL: J65 J68 I38
    Date: 2010–11
  13. By: Araujo, Ricardo Azevedo; Teixeira, Joanílio Rodolpho
    Abstract: With this inquiry we seek to develop a disaggregated version of the post-Keynesian approach to economic growth, by showing that indeed it can be treated as a particular case of the Pasinettian model of structural change and economic expansion. By relying upon vertical integration it becomes possible to carry out the analysis initiated by Kaldor (1956) and Robinson (1956, 1962), and followed by Dutt (1984), Rowthorn (1982) and later Bhaduri and Marglin (1990) in a multi-sectoral model in which demand and productivity increase at different paces in each sector. By adopting this approach it is possible to show that the structural economic dynamics is conditioned not only to patterns of evolving demand and diffusion of technological progress but also to the distributive features of the economy, which can give rise to different regimes of economic growth. Besides, we find it possible to determine the natural rate of profit that makes the mark-up rate to be constant over time.
    Keywords: Post-Keynesian growth model; structural change; multi-sector models
    JEL: O11 D33 E11
    Date: 2011–04–14
  14. By: Soklis, George
    Abstract: This paper extends the empirical investigation of the shape of wage-profit curves to the case of joint production using data from the Supply and Use Tables of the Finnish economy (for the years 1995 through 2004). It is found that (i) the considered systems do not have the usual properties of single-product systems; and (ii) the monotonicity of the wage-profit curves depends on the adopted normalization condition.
    Keywords: Wage-profit curves; joint production; supply and use tables; input-output analysis
    JEL: B51 D33 D57
    Date: 2011
  15. By: Schwalje, Wes
    Abstract: The movement of many countries towards knowledge-based economic development requires the transition to more effective skill formation systems. This paper proposes an institutionalist approach to national skills development systems in the advancement towards knowledge-based economic development. There is currently no accepted general framework to analyze national skills development systems which has resulted in countries adopting reactive approaches to skills development problems. The conceptual framework advanced is an integrated, systemic view of national skills formation systems guided by government intervention in light of rampant failures of neo-liberal skills formation approaches that rely upon market mechanisms. The framework contributes to the skills formation literature by reviewing, synthesizing, and building on the literature from a multidisciplinary perspective that considers the relevant institutions and interests of key stakeholders as highly interrelated in the context of knowledge-based economic development and achievement of accompanying economic, political, and social objectives.
    Keywords: skills formation; knowledge economy; competitiveness; skills development policy; economic development
    JEL: J40 J41 J24
    Date: 2011–04–14
  16. By: Akhabbar, Amanar; Lallement, Jérôme
    Abstract: Leontief’s input-output models are usually viewed as simplified classical (neo-Ricardian) models. However, this interpretation hides two opposed views. On the one hand, the common interpretation, based on Koopmans and Samuelson’s works, considers the so-called “models of Leontief” as simplified Ricardian models, in the sense of Samuelson, which are shown to be special cases of general equilibrium theory. In their framework, general equilibrium theory might be interpreted as a generalized model of Leontief and, reversely, models of Leontief are simplified Walrasian general equilibrium models. According to this theoretical tradition, classical theory and Walrasian general equilibrium theory are intimately linked and Classical economics is an “archaic” general equilibrium theory. On the other hand, neo-Ricardians view models of Leontief as simplified classical models that are incompatible with Walras’ general equilibrium theory. Our paper examines in details the last argument: the incompatibility argument. Such a work will require to examine in details the definition of vague categories as "Walrasian", "Classical" and so forth. We show that incompatibility between models of Leontief and Walras’ general equilibrium theory is ultimately based on Sraffa’s worldview: “The connection of [my] work with the theories of the old classical economists has been alluded to in the preface... It is of course in Quesnay’s Tableau Economique that is found the original picture of the system of production and consumption as a circular process, and it stands in striking contrast to the view presented by modern theory of a one-way avenue that leads from ‘Factors of production’ to ‘Consumption goods’.” (Sraffa, 1960) Neo-Ricardian’s opposition between classical economics and Walrasian theory is based on the representation of production: classical economics refers to circular flow while Marginalist theory refers to a one-way avenue production process. As it makes a sharp distinction between the two theoretical traditions, we call this criterion "Sraffa’s Guillotine". Based on Leontief’s PhD dissertation (1928) and his early input-output model (1937), the main result of our inquiry is that this criterion is powerless to distinguish Leontief’s representation of production as a circular flow and Walras one. Indeed, while Leontief based his models on Marx’ reproduction scheme, his representation of production is the same than Walras’ complete one, in striking contrast with neo-Ricardian critical apparatus. Hence we argue in favor of a pluralist interpretation of the models of Leontief: both Classical and Walrasians.
    Keywords: Walras; Sraffa; Leontief; input-output analysis; Marx; production; non substitution theorem; general equilibrium theory
    JEL: B51 B1 B23 C67 D24
    Date: 2010–12–01
  17. By: Akhabbar, Amanar; Lallement, Jerôme
    Abstract: The way the expresssion "applied economics" was employed changed deeply from one author to another. In this article we examine the meaning of this concept in Leon Walras' and Wassily Leontief's works regarding mathematical models of general interdependence and general equilibrium. It appears that empirical analysis played very different roles in their works but that they both considered economics should develop policy-oriented theory.
    Keywords: Leontief; Walras; Keynes; épistémologye; application; general equilibrium theory; input output analysis; economic policy
    JEL: P0 B21 B23 B13 B41
    Date: 2011–01–01
  18. By: Crow, Ben D; Odaba, Edmond
    Abstract: This paper describes the ways that households, and particularly women, experience water scarcity in a large informal settlement in Nairobi, Kenya, through heavy expenditures of time and money, considerable investments in water storage and routinized sequences of defer red household tasks. It then delineates three phases of adaptive water and social engineering undertaken in several informal settlements by the Nairobi Water Company in an ongoing attempt to construct effective municipal institutions and infrastructure to improve residential access to water and loosen the grip that informal vendors may have on the market for water in these localities.
    Keywords: slums, water supply, water markets, institutions, deliberative democracy, gender, household water storage, Kenya, Inequality and Stratification
    Date: 2010–11–01

This nep-hme issue is ©2011 by Frederic S. Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.