nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2012‒05‒08
nineteen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. "Introduction to an Alternative History of Money" By L. Randall Wray
  2. Trends in Occupational Segregation by Gender 1970-2009: Adjusting for the Impact of Changes in the Occupational Coding System By Blau, Francine D.; Brummund, Peter; Liu, Albert Yung-Hsu
  3. Ziliak and McClosky's Criticisms of Significance Tests: A Damage Assessment By Mayer, Thomas
  4. Applications of statistical mechanics to economics: Entropic origin of the probability distributions of money, income, and energy consumption By Victor M. Yakovenko
  5. Women in the Boardroom: Symbols or Substance? By O'Reilly, Charles A., III; Main, Brian G. M.
  6. Adam Smith on Monopoly Theory. Making good a lacuna By Salvadori, Neri; Signorino, Rodolfo
  7. Comparing Real Wage Rates By Ashenfelter, Orley
  8. Economics, Ecology and GMOs: Sustainability, Precaution and Related Issues By Tisdell, Clement A.
  9. Identifying and characterising price leadership in British supermarkets By Seaton, Jonathan S.; Waterson, Michael
  10. The Birth and the Rise of the Cluster Concept By Luciana Lazzeretti; Silvia Rita Sedita; Annalisa Caloffi
  11. La dynamique des innovations d'exploration et d'exploitation des PME à travers les alliances stratégiques. By Bouzid, Inès
  12. A 2005 Agriculture-Food SAM (AgriFood-SAM) for Ireland By Ana Corina Miller; Alan Matthews; Trevor Donnellan; Cathal O'Donoghue
  13. Raising the Financial Costs of Children and Fertility Responses: Evidence from the Kibbutz By Ebenstein, Avraham; Hazan, Moshe; Simhon, Avi
  14. Works Councils, Collective Bargaining and Apprenticeship Training By Kriechel, Ben; Mühlemann, Samuel; Pfeifer, Harald; Schuette, Miriam
  15. Evolution of poverty in Bolivia: a multidementional approach By Werner L. Hernani-Limarino; Paul Villarroel
  16. WP 119 - “He would never just hit the sofa” A narrative of non-complaining among Dutch Mothers By Justine Ruitenberg
  17. How Do Aggregate Fluctuations Depend on the Network Structure of the Economy? By Lorenzo Burlon
  18. Self Help Group-Banking-Poverty Reduction Nexus: A Case Study of Uttarakhand State, India By Kaliappa Kalirajan; Kanhaiya Singh
  19. The US financial system, the great recession, and the “speculative spread” By Hsu, Sara

  1. By: L. Randall Wray
    Abstract: This paper integrates the various strands of an alternative, heterodox view on the origins of money and the development of the modern financial system in a manner that is consistent with the findings of historians and anthropologists. As is well known, the orthodox story of money's origins and evolution begins with the creation of a medium of exchange to reduce the costs of barter. To be sure, the history of money is "lost in the mists of time," as money's invention probably predates writing. Further, the history of money is contentious. And, finally, even orthodox economists would reject the Robinson Crusoe story and the evolution from a commodity money through to modern fiat money as historically accurate. Rather, the story told about the origins and evolution of money is designed to shed light on the "nature" of money. The orthodox story draws attention to money as a transactions-cost-minimizing medium of exchange. Heterodox economists reject the formalist methodology adopted by orthodox economists in favor of a substantivist methodology. In the formalist methodology, the economist begins with the "rational" economic agent facing scarce resources and unlimited wants. Since the formalist methodology abstracts from historical and institutional detail, it must be applicable to all human societies. Heterodoxy argues that economics has to do with a study of the institutionalized interactions among humans and between humans and nature. The economy is a component of culture; or, more specifically, of the material life process of society. As such, substantivist economics cannot abstract from the institutions that help to shape economic processes; and the substantivist problem is not the formal one of choice, but a problem concerning production and distribution. A powerful critique of the orthodox story regarding money can be developed using the findings of comparative anthropology, comparative history, and comparative economics. Given the embedded nature of economic phenomenon in prior societies, an understanding of what money is and what it does in capitalist societies is essential to this approach. This can then be contrasted with the functioning of precapitalist societies in order to allow identification of which types of precapitalist societies would use money and what money would be used for in these societies. This understanding is essential for informed speculation on the origins of money. The comparative approach used by heterodox economists begins with an understanding of the role money plays in capitalist economies, which shares essential features with analyses developed by a wide range of Institutionalist, Keynesian, Post Keynesian, and Marxist macroeconomists. This paper uses the understanding developed by comparative anthropology and comparative history of precapitalist societies in order to logically reconstruct the origins of money.
    Keywords: Origins of Money; Evolution of Financial System; Substantivist Methodology; Comparative History; Nature of Money
    JEL: B5 B25 B41 E11 E12 N01 N2 P1
    Date: 2012–05
  2. By: Blau, Francine D. (Cornell University); Brummund, Peter (Cornell University); Liu, Albert Yung-Hsu (Mathematica Policy Research)
    Abstract: In this paper, we develop a gender-specific crosswalk based on dual-coded Current Population Survey data to bridge the change in the Census occupational coding system that occurred in 2000 and use it to provide the first analysis of the trends in occupational segregation by sex for the 1970-2009 period based on a consistent set of occupational codes and data sources. We show that our gender-specific crosswalk more accurately captures the trends in occupational segregation that are masked using the aggregate crosswalk (based on combined male and female employment) provided by the U.S. Census Bureau. Using the 2000 occupational codes, we find that segregation by sex declined over the period but at a diminished pace over the decades, falling by 6.1 percentage points over the 1970s, 4.3 percentage points over the 1980s, 2.1 percentage points over the 1990s, and only 1.1 percentage points (on a decadal basis) over the 2000s. A primary mechanism by which occupational segregation was reduced over the 1970-2009 period was through the entry of new cohorts of women, presumably better prepared than their predecessors and/or encountering less labor market discrimination; during the 1970s and 1980s, however, there were also decreases in occupational segregation within cohorts. Reductions in segregation were correlated with education, with the largest decrease among college graduates and very little change in segregation among high school dropouts.
    Keywords: occupations, occupational segregation, gender, discrimination
    JEL: J16 J24 J62 J71
    Date: 2012–04
  3. By: Mayer, Thomas (University CA, Davis)
    Abstract: D. N. McCloskey and Stephen Ziliak have criticized economists and others for confounding statistical and substantive significance, and for committing the logical error of the transposed conditional. In doing so they sometimes misinterpret the function of significance tests. Nonetheless, economists sometimes make both of these errors--but not nearly as often as Ziliak and McCloskey claim. They also argue--incorrectly--that the existence of an effect, which is what significance tests are about, is not a scientific question. Their complaint that in testing significance economists often do not take the loss function into account is unfounded. But they are right in arguing that confidence intervals should be presented more frequently.
    JEL: B40 C12
    Date: 2012–04
  4. By: Victor M. Yakovenko
    Abstract: This Chapter is written for the Festschrift celebrating the 70th birthday of the distinguished economist Duncan Foley from the New School for Social Research in New York. This Chapter reviews applications of statistical physics methods, such as the principle of entropy maximization, to the probability distributions of money, income, and global energy consumption per capita. The exponential probability distribution of wages, predicted by the statistical equilibrium theory of a labor market developed by Foley in 1996, is supported by empirical data on income distribution in the USA for the majority (about 97%) of population. In addition, the upper tail of income distribution (about 3% of population) follows a power law and expands dramatically during financial bubbles, which results in a significant increase of the overall income inequality. A mathematical analysis of the empirical data clearly demonstrates the two-class structure of a society, as pointed out Karl Marx and recently highlighted by the Occupy Movement. Empirical data for the energy consumption per capita around the world are close to an exponential distribution, which can be also explained by the entropy maximization principle.
    Date: 2012–04
  5. By: O'Reilly, Charles A., III (Stanford University); Main, Brian G. M. (University Edinburgh)
    Abstract: The central argument for increasing the number of women on corporate boards of directors has been the so-called "business case for diversity" which proposes that women and minorities add valuable new perspectives that result in enhanced corporate performance. Unfortunately, the empirical evidence for this claim is mixed, leading some researchers to suggest that women outsiders are appointed for symbolic rather than substantive reasons. Using a sample of more than 2,000 firms over the period 2001-2005, we examine the effects of women outside directors on firm performance and CEO compensation. We find no evidence that adding women outsiders to the board enhances corporate performance. We do find some evidence that male CEOs with higher levels of compensation are more likely to appoint women outsiders and that boards with more women outside members are more generous in paying the CEO. We interpret these results as consistent with the appointment of women outsiders for normative rather than profit-enhancing reasons.
    Date: 2012–03
  6. By: Salvadori, Neri; Signorino, Rodolfo
    Abstract: The paper analyzes Adam Smith’s views on monopoly focusing on Book IV and V of The Wealth of Nations and argues that Smith has left his analysis of monopoly in an embryonic form while the majority of scholars have assessed it starting from premises different from those, actually though implicitly, used by Smith to approach this subject. We show that Smith makes use of the word ‘monopoly’ to refer to a heterogeneous collection of market outcomes, besides that of a single seller market, and that Smith’s account of monopolists’ behavior is richer than that provided by later monopoly theorists.
    Keywords: Competition; Monopoly; Classical Economics; Adam Smith
    JEL: L51 B31 B12 L41 D42
    Date: 2012–04–27
  7. By: Ashenfelter, Orley (Princeton University)
    Abstract: A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. In this paper I set out the conceptual basis for such measures, provide some historical examples, and then provide my own preliminary analysis of a decade long project designed to measure the wages of workers doing the same job in over 60 countries – workers at McDonald’s restaurants. The results demonstrate that the wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000-2007, but with much less progress since the Great Recession.
    Keywords: real wage rates, international comparisons, productivity
    JEL: C81 C82 D24 J31 N30 O57
    Date: 2012–04
  8. By: Tisdell, Clement A.
    Abstract: Ecological, evolutionary and economic issues involved in introducing genetically modified organisms (GMOs), mainly in agriculture, are discussed. The ecological and evolutionary impacts identified hamper (economic) valuation of GMOs and their biosafety regulation and creates difficulties for planning for sustainable development. Assessment of the desirability of releasing GMOs is difficult because of lack of communal agreement about the risks involved, about how much precaution should be exercised given collective risks, and disagreement on the appropriate social criterion to apply. Changes in legal liability are not always economic and cannot eliminate the social conflict generated by GMOs. The economics of developing and marketing GMOs is explored, assuming the type of intellectual property rights in GMOs in the United States. It is found that the economics of developing and marketing GMOs favours large enterprises as primary suppliers. In marketing GMOs, sales to larger-sized commercial farms rather than smaller-sized ones are preferred. GMOs preferred for development are those designed to satisfy large agricultural markets, mostly located in higher income countries. The patenting of GMOs, co-evolution, various social conflicts in the use of GMOs and legal liability for damages caused by GMOs are discussed both from a socioeconomic and biosafety point of view.
    Keywords: Biodiversity, biosafety, genetically modified organisms, GMOs, intellectual property rights, market structure, sustainable development, Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Food Consumption/Nutrition/Food Safety,
    Date: 2011–09
  9. By: Seaton, Jonathan S. (Loughborough University); Waterson, Michael (University of Warwick)
    Abstract: Price leadership is a concept that lacks precision. We propose a deliberately narrow, falsifiable, definition and illustrate its feasibility using the two leading British supermarket chains. We find both firms engaging in leadership behaviour over a range of products, with the larger being somewhat more dominant but the smaller increasing leadership activity over time. Surprisingly, more price leadership events are price reductions than price increases, but the increases are of larger monetary amounts (so average price increases over time) and the events appear not necessarily related to cost changes. Price leadership appears to play some role in price increases.
    Date: 2012
  10. By: Luciana Lazzeretti (University of Firenze); Silvia Rita Sedita (University of Padova); Annalisa Caloffi (University of Padova)
    Abstract: Why has the cluster concept proved so successful in this millennium? Which are the authors, the scientific areas, and journals that have helped to enliven the debate in this era, characterized by the transition from a solid modernity to a liquid modernity, as the well-known sociologist Zygmunt Bauman would say? With this work, we have aimed to answer these research questions by adopting an evolutionary approach. By means of a bibliometric analysis based on descriptive statistics and social network analysis tools, we have identified the founders and the main disseminators of the cluster concept across time. The point of departure is an original database, created by the authors, consisting of 1586 academic articles about industrial clusters that have been published from 1989 to 2010 in international scientific journals (source: ISI Web of Science). Our claim is that the Porterian contribution on clusters opens up a global debate over a concept that was Òin the airÓ many years before. The cluster concept is rooted in the Marshallian tradition, and is strongly related to the Italian and European literature, which is more familiar with the narrower concept of the industrial district. By relaxing some of the specific features that characterized the industrial district model, a more inclusive concept is promoted, which, in a prey-predator relationship, assimilates previous contributions. By now, the cluster concept has gained international recognition and been constantly sustained by a theoretical discussion that encompasses a variety of disciplines and approaches. Our evidence shows that this success can be attributed basically to the liquid properties we have identified: multi-disciplinary and cross-disciplinary qualities and global dimension.
    Keywords: cluster, industrial districts, liquid modernity, bibliometric analysis, co-citation analysis.
    JEL: R1
    Date: 2012–04
  11. By: Bouzid, Inès
    Abstract: L’objectif de cette recherche est de comprendre le rôle que peuvent jouer les alliances complémentaires et additives d’une PME pour concilier les innovations d’exploration et les innovations d’exploitation. La compréhension du contexte de la conclusion des alliances par la PME et les liens qui peuvent exister entre les différentes natures des alliances et des innovations étudiées a été conduite selon deux approches. En effet, la recherche réunit les apports d’une approche exploratoire qualitative et ceux d’une étude confirmatoire quantitative. La recherche montre que la conduite des innovations d’exploration et d’exploitation au moyen des alliances stratégiques est influencée par un ensemble de facteurs contextuels, organisationnels et stratégiques. La phase exploratoire a permis de distinguer clairement les alliances de la PME avec l’industrie et celles avec le monde académique. La phase confirmatoire quant à elle a permis d’éclairer les spécificités des différentes alliances des PME en termes de ressources mobilisées, de choix des partenaires, d’objectifs stratégiques et d’innovations conduites. Cette recherche montre que la conciliation des innovations d’exploration et d’exploitation au sein d’une même PME, au moyen de la mise en oeuvre des alliances complémentaires et additives, s’opère avec différentes natures de partenaires.
    Abstract: The aim of this research is to understand the role played by the complementary and additive alliances of Small to Medium sized Enterprises (SMEs) in order to conciliate both explorative and exploitative innovation. The understanding of the context of the conclusion of SMEs alliances and the links which can exist between the various natures of the alliances and the studied innovations was led according to two approaches. In fact, the research brings together both the contributions of a qualitative exploratory approach with those of a quantitative confirmatory study. The research shows that the driving of both explorative and exploitative innovations by means of the strategic alliances is influenced by a set of contextual, organizational and strategic factors. The exploratory phase has allowed distinguishing clearly between the SMEs’s alliances with the industry and those with the academic word. In the other hand, the confirmatory phase has allowed to clarify the specificities of the various alliances of the SMEs in terms of mobilized resources, partner’s choice, strategic objectives and driven innovation. This research shows that the conciliation of explorative and exploitative innovation within the same SMEs, by means of the implementation of the complementary and additive alliances, takes place with various natures of partners.
    Keywords: Explorative innovation; Exploitative innovation; Complementary alliance; Additive alliance; Resources and competencies; SMEs; Innovation d’exploration; Innovation d’exploitation; Alliance complémentaire; Alliance additive; Ressources et compétences; PME;
    JEL: L14 C93 O31
    Date: 2011–12
  12. By: Ana Corina Miller (IIIS and Department of Economics, Trinity College Dublin); Alan Matthews (IIIS and Department of Economics, Trinity College Dublin); Trevor Donnellan (Rural Economy Research Centre, Teagasc); Cathal O'Donoghue (Rural Economy Research Centre, Teagasc)
    Abstract: This paper describes the construction of a social accounting matrix with disaggregated agricultural and food industry sectors for Ireland for the purpose of agri-food policy simulations. The base year for the AgriFood–SAM is 2005 and it draws on a recently constructed 2005 SAM for Ireland (Miller et al., 2011). Its unique features include a high level of disaggregation of the agricultural and food industry sectors as well as the integration of individual household data for the purposes of micro-simulation analysis. The AgriFood–SAM documented here can be used as a tool to analyse the intersectoral linkages between the agri-food sectors and the Irish economy. Multiplier effects for exogenous changes in final demand for different agri-food activities are presented. This paper also presents the economic impact of reducing GHG emissions from the agricultural sectors by 20%, using a SAM multiplier analysis. The linear SAM model is based on the Leontief model, but as it incorporates income generation and distribution as well as the production side, it captures the complete circular flow of the economy. The results suggest that a 20% reduction in GHG emission by 2020 will have a contractionary effect in the whole economy. This policy will reduce the total gross output in the economy by more than half a billion euro and have an indirect effect on the household by reducing its total income with more than €200 million. In interpreting the results form a multiplier analysis we should be careful as the model assumes fixed proportion production functions, fixed prices and free availability of resources. In other words if cattle output reduces by 12.6% in 2020 then the level of inputs used in by this sectors is assumed to be reduced by same percentage. Similarly employment and income are assumed to be reduced in the same proportions. Also, multipliers are based on the state of technology within a sector at a point in time. Hence, multipliers may change in different sectors over time as technology changes.
    Keywords: social accounting matrix, input-output table, agriculture, multiplier analysis, Ireland
    JEL: C67 D57 Q12 Q18
    Date: 2011
  13. By: Ebenstein, Avraham; Hazan, Moshe; Simhon, Avi
    Abstract: Prior to 1996, Israelis in collective communities (kibbutzim) shared the costs of raising children equally. This paper examines the impact of the privatization of kibbutzim on fertility behavior among members. We find that fertility declined by 6-15 percent following the shift to privatization. In light of the massive change in financial costs associated with childbearing due to privatization, our results suggest that financial considerations may be a more modest factor in fertility decisions than generally regarded.
    Keywords: Kibbutz, Costs of Children, fertility, privatization, Financial Economics, Institutional and Behavioral Economics,
    Date: 2011
  14. By: Kriechel, Ben (ROA, Maastricht University); Mühlemann, Samuel (University of Bern); Pfeifer, Harald (BIBB); Schuette, Miriam (BIBB)
    Abstract: In this paper, we investigate the effects of works councils on apprenticeship training in Germany. The German law attributes works councils substantial information and co-determination rights to training-related issues. Thus, works councils may also have an impact on the cost-benefit relation of workplace training. Using detailed firm-level data containing information on the costs and benefits of apprenticeship training, we find that firms with works councils make a significantly higher net investment in training compared with firms without such an institution. We also find that the fraction of former trainees still employed with the same firm five years after training is significantly higher in the presence of works councils, thus enabling firms to recoup training investments over a longer time horizon. Furthermore, all works council effects are much more pronounced for firms covered by collective bargaining agreements.
    Keywords: works councils, collective bargaining agreement, apprenticeship training, firm-sponsored training
    JEL: J24 J50 M53
    Date: 2012–04
  15. By: Werner L. Hernani-Limarino (Fundación ARU); Paul Villarroel (Fundación ARU)
    Abstract: This document constructs a multidimentional measure of poverty for Bolivia based on the new 2008 constitution's fundamental rights, which can be measured in surveys; it also documents the changes in poverty observed in the last decade, in a multidimensional approach. Particulary, we extend the analysis made by Hernani Limarino (2010) on the evolution of poverty in monetary dimensions with a complementary analysis of five other non-monetary dimentions: access to education, short term social security (health), long term social security (pensions), housing and basic household services. The Analysis shows that non-monetary poverty has remained in high levels, and quite elusive despite the reduction in poverty according to monetary measures has decreased.
    Keywords: Bolivia, Multidimensional Poverty.
    JEL: I30 I32 I39
    Date: 2012–01
  16. By: Justine Ruitenberg (Programma Dienstbare Overheid, Inspectie Werk & Inkomen, Ministerie van Sociale Zaken en Werkgelegenheid)
    Abstract: Working patterns among Dutch mothers differ remarkably. This variation makes the Netherlands an interesting case to study the origins of the labour participation pattern of women and mothers in particular. This article explores the influence of mothers’ work and gender attitudes and preferences on their diverse employment pattern through 39 semi-structured interviews with mothers living in Amsterdam. Previous studies have already addressed the question to what extent women’s attitudes correspond with their labour market behaviour. Yet, most of these studies are based on large surveys which lack the detail to study the intricacies of the relationship between attitudes, preferences and behaviour. This study shows that a woman’s employment behaviour is the result of a dynamic relationship between her personal work preferences and gender and work attitudes on the one hand, and het work experiences and cultural normative gender expectations on the other, rather than the outcome of a free choice. The study further reveals the prevalence of ‘a narrative of non-complaining’ among Dutch mothers regarding their spouses’ contribution to the home work. This finding may help to understand why the division of labour at home along gender lines persists.
    Date: 2012–04
  17. By: Lorenzo Burlon (Universitat de Barcelona)
    Abstract: In this paper we analyze the aggregate volatility of a stylized economy where agents are networked. If strategic relations connect agents,actions, idiosyncratic shocks can generate nontrivial aggregate fluctuations. We show that the aggregate volatility depends on the network structure of the economy in two ways. On the one hand, the more connected the economy, the lower the aggregate volatility. On the other hand, the more concentrated the network, the higher the aggregate volatility. We provide an application of our theoretical predictions using US data on intersectoral linkages and firms diversification patterns.
    Keywords: aggregate fluctuations, firms, intersectoral linkages, networks
    JEL: C67 E32 D57
    Date: 2012
  18. By: Kaliappa Kalirajan; Kanhaiya Singh
    Abstract: In order to fight back poverty, the Central as well as States Governments in India have attempted a number of programs leading to income generation. Like in any developing country, poor governance with lack of proper focus in implementing the programs are the main sources contributing to low human capital development and thereby to rising number of people living below the poverty line in India. The poverty alleviation programs target the people living below poverty line or just above poverty line through self help group units. The empirical analysis presented in this study, which is based on the primary survey data, clearly indicates that the self help group movement in Uttarakhand State in North India is poorly targeted at the poor, though it is a general programme of raising income in the rural areas. Lack of initiatives by the concerned authorities of the self help group movement and the state government in encouraging the poor to work in groups for a common cause of reducing poverty is the basic problem identified in the state. Another critical factor is the limited availability of traditional economic activities to leverage the skill with more efficient methods and affordable credit. The policy conclusion of this study is that there is an urgent need to improve the self help group system by implementing an approach, which should aim at the ultimate goal of poverty alleviation rather than just providing one time employment generation.
    Keywords: self help group, self help group and banking, poverty, Uttarakhand State
    JEL: I31 I38
    Date: 2012
  19. By: Hsu, Sara
    Abstract: The Great Recession was an enormous surprise to mainstream economists, while not as much to non-mainstream economists, due to differences in views of the financial economy and its interaction with the real economy. While policy makers continue to follow mainstream economic theory, with the implication that regulation and transparency can fix any market glitches, many remain skeptical of the ability of regulation to prevent this type of crisis in the future. Deeper restructuring of the economy, with curbs on the worst practices of speculation, are necessary to provide long-term stability. We have explored one way in which to measure speculation versus production, in what we call a “speculative spread,” and suggest that this may be an important means to understanding to what degree the economy is overfinancialized.
    Keywords: Great Recession; speculation; financialization; shadow banking
    JEL: G01 G20
    Date: 2012

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