nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2013‒08‒05
fourteen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Understanding Profit and the Markets: The Canonical Model By Kakarot-Handtke, Egmont
  2. Analysis of wealth using micro and macro data: a comparison of the Survey of Consumer Finances and Flow of Funds Accounts By Alice M. Henriques; Joanne W. Hsu
  3. Endogenous Price Commitment, Sticky and Leadership Pricing: Evidence from the Italian Petrol Market By Andreoli-Versbach, Patrick; Franck, Jens-Uwe
  4. The text for legality under EU competition rules: What guidance do the commission's guidelines provide? By Behrens, Peter
  5. Framing moral markets: The cultural legacy of social movements in an emerging market category By Schiller-Merkens, Simone
  6. Unethical Culture, Suspect CEOs and Corporate Misbehavior By Lee Biggerstaff; David C. Cicero; Andy Puckett
  7. Minimum Wage and the Average Wage in France: A Circular Relationship? By Cette, Gilbert; Chouard, Valérie; Verdugo, Gregory
  8. Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets By Andreoli-Versbach, Patrick; Franck, Jens-Uwe
  9. The politics of public debt: Neoliberalism, capitalist development, and the restructuring of the state By Streeck, Wolfgang
  10. Corporate governance of banks: A survey By Jakob de Haan; Razvan Vlahu
  11. Can Trust Explain Social Capital Effect on Property Rights and Growth? By Hall, Stephen G; Ahmad, Mahyudin
  12. The Market for Paintings in the Netherlands during the Seventeenth Century By Federico Etro; Elena Stepanova
  13. The Machine Tool Industry in Italy: Industrial Innovations and Performances By Fabio Campanini; Serena Costa; Paolo Rizzi
  14. The real cost of credit constraints: Evidence from micro-finance By Renuka Sane; Susan Thomas

  1. By: Kakarot-Handtke, Egmont
    Abstract: Neither Walrasians nor Keynesians have a clear idea of the fundamental economic concepts income and profit, nor of the interdependence of qualitatively different markets. Critique of these approaches is necessary but not overly productive. A real breakthrough requires a new set of premises because no way leads from the accustomed behavioral assumptions to the understanding of how the economy works. More precisely, the hitherto accepted behavioral axioms have to be replaced by structural axioms. Starting from new formal foundations, this paper gives a comprehensive and consistent account of the objective interrelations of the monetary economy’s elementary building blocks.
    Keywords: new framework of concepts; structure-centric; axiom set; income; profit; full employment; price stability; quantitative adaptation; primary markets; secondary markets; financial markets
    JEL: B59 D00 E00
    Date: 2013–07–27
  2. By: Alice M. Henriques; Joanne W. Hsu
    Abstract: Researchers use different types of household balance sheet data to study different aspects of lifecycle saving and wealth accumulation behavior. Macro data from the Flow of Funds Accounts (FFA) are produced at a quarterly frequency and are available in a timely manner, but they can only be used to study the behavior of the household sector as a whole. Micro data from the Survey of Consumer Finances (SCF) are available every three years and only with a lag, but they can be used to address questions that involve differences in behavior over time and across various types of households. Despite the very different approaches to estimating household net worth, the two data sets show the same general patterns wealth changes over the past twenty-five years. Areas where the FFA and SCF diverge in aggregate levels—in categories such as owner-occupied housing, noncorporate equity, and credit cards—may be explained by methodological decisions applied in the production of the data. Those differences do not fundamentally alter one's perception of household wealth dynamics in the period leading up to and following the Great Recession.
    Date: 2013
  3. By: Andreoli-Versbach, Patrick; Franck, Jens-Uwe
    Abstract: This article studies dynamic pricing strategies in the Italian gasoline market before and after the market leader unilaterally announced its commitment to adopt a sticky-pricing policy. Using daily Italian firm level prices and weekly average EU prices, we show that the effect of the new policy was twofold. First, it facilitated price alignment and coordination on price changes. After the policy change, the observed pricing pattern shifted from cost-based to sticky-leadership pricing. Second, using a dif-in-dif estimation and a synthetic control group, we show that the causal effect of the new policy was to significantly increase prices through sticky-leadership pricing. Our paper highlights the importance of price-commitment by a large firm in order to sustain (tacit) collusion.
    Keywords: tacit collusion; leadership pricing; sticky pricing; endogenous commitment
    JEL: K21 K42 L13 L41 L71
    Date: 2013–07
  4. By: Behrens, Peter
    Abstract: Under the regime of Regulation 1/2003 on the implementation of the rules of competition laid down in Articles 101 and 102 TFEU undertakings are obliged to take care by themselves of their compliance with the competition rules. For practical purposes this is also true when it comes to the rules applicable to the the control of concentrations under Regulation 139/2004. In order to facilitate the task of undertakings, which has become even more difficult according to the more economic approach to competition law, the Commission has published a number of guidelines which are setting out the relevant criteria applied by the Commission itself. A closer look reveals, however, that the criteria defined in the various guidelines are far from reflecting a coherent, precise and consistent approach of the Commission. At least four distinct legal tests may be identified, such as a consumer harm-test, a negative market effects-test, a market power-test and a competitive process-test. This paper analyses the various guidelines in order to demonstrate how these different approaches are embedded in their wording. The unavoidable conclusion is that undertakings get much less guidance from the guidelines than they would be justified to expect. This is all the more deplorable, because the European cours' jurisdprudence continues to follow an approach which is considerably different from the Commission's. --
    Keywords: competition rules,merger control,competition guidelines,effects based approach,consumer harm,market power,market structure,competitive process,competitors' rivalry,consumer choice
    Date: 2013
  5. By: Schiller-Merkens, Simone
    Abstract: One challenge facing research on categories is to explain their content and the extent to which they gain meaning from cultural material that originates from moral arenas. This article suggests that categories are an outcome of strategic framing activities by which market members draw on prevalent master frames as cultural material to infuse an emerging market with meaning. It depicts the construction of a market category that emerges at the boundary between the economic sphere of a market and the moral sphere of social movements. A qualitative study of the use of movement master frames in categorizing the market for ethical fashion in the United Kingdom indicates the important role of movements' cultural legacy for the categorization of a moral market. It shows that the master frame of the environmental movement prevails in market categorization. Furthermore, we see that market members tend to adopt movement frames in categorization to discuss solutions rather than to talk about problems. Two propositions are drawn from these findings. First, when market making happens at the boundary of several social movements, market members adopt the master frame mainly of the movement whose activism has already led to changes in the political agenda, in social beliefs and practices in society. Second, framing tactics change when movement frames leave the moral sphere of activist mobilization and enter the economic sphere. While talking about problems has been shown to be as important as the provision of solutions in the movement arena, providing solutions becomes more important when movement frames are adopted in the economic arena of a market. -- Kategorien sind zentrale Bestandteile der kulturellen Strukturierung von Märkten. Eine der Herausforderungen der Kategorienforschung ist es, die Inhalte von Kategorien zu erklären und herauszufinden, wie stark sie durch moralisch geprägte kulturelle Elemente beeinflusst werden. Das Papier stellt Kategorien als Ergebnis strategischer Rahmungsprozesse (framing) vor, wobei Marktakteure einem entstehenden Markt anhand verbreiteter kultureller Deutungsmuster (master frames) Bedeutung verleihen. Es beschreibt die Konstruktion einer Marktkategorie, die an der Grenze zwischen der ökonomischen Sphäre eines Marktes und der moralischen Sphäre sozialer Bewegungen entsteht. Die am Beispiel des Marktes für ethische Mode in Großbritannien durchgeführte qualitative Untersuchung stellt heraus, wie wichtig das kulturelle Vermächtnis sozialer Bewegungen für die Kategorisierung eines moralisch geprägten Marktes ist. Die Ergebnisse der Untersuchung zeigen einerseits die herausgehobene Bedeutung der Umweltbewegung für die Kategorisierung des Marktes. Sie zeigen andererseits die Tendenz der Marktakteure zu einer eher lösungs-denn problemorientierten Rahmungsaktivität: Die Deutungsrahmen sozialer Bewegungen werden zur Kategorisierung herangezogen, um Lösungsansätze zu diskutieren, weniger jedoch, um die zugrunde liegenden Probleme zu benennen. Aus diesen Ergebnissen werden schließlich zwei Thesen abgeleitet. Erstens: Entstehen neue Märkte an der Grenze zu mehreren sozialen Bewegungen, so übernehmen Marktakteure eher den Deutungsrahmen jener Bewegung, deren Aktivismus die politische Agenda, gesellschaftliche Überzeugungen und Praktiken bereits nachhaltig verändert hat. Zweitens: Die Rahmungstaktiken ändern sich mit dem Wechsel der Bewegungsrahmen von der moralischen Sphäre aktivistischer Mobilisierung in die ökonomische Sphäre. Während zur Mobilisierung von Aktivisten die Problemdiskussion als gleichbedeutend mit der Entwicklung von Lösungsansätzen gewertet wird, gewinnt die Präsentation von Lösungen an Bedeutung, sobald die Bewegungsrahmen in den ökonomischen Bereich eines Marktes übertragen werden.
    Date: 2013
  6. By: Lee Biggerstaff; David C. Cicero; Andy Puckett
    Abstract: We show that firms with CEOs who personally benefitted from options backdating were more likely to engage in other forms of corporate misbehavior, suggestive of an unethical corporate culture. These firms were more likely to overstate firm profitability and to engage in less profitable acquisition strategies. The increased level of corporate misbehaviors is concentrated in firms with suspect CEOs who were outside hires, consistent with adverse selection in the market for chief executives. Difference-in-differences tests confirm that the propensity to engage in these activities is significantly increased following the arrival of an outside-hire ‘suspect’ CEO, suggesting that causation flows from the top executives to the firm. Finally, while these suspect CEOs appear to have avoided market discipline when the market was optimistic, they were more likely to lose their jobs and their firms were more likely to experience dramatic declines in value during the ensuing market correction.
    JEL: G3 G34
    Date: 2013–07
  7. By: Cette, Gilbert (Bank of France); Chouard, Valérie (Bank of France); Verdugo, Gregory (Bank of France)
    Abstract: This paper investigates whether increases in the minimum wage in France have the same impact on the average wage when intended to preserve the purchasing power of the minimum wage as when intended to raise it. We find that the impact of the minimum wage on the average wage is strong, but differs depending on the indexation factor. We also find some empirical evidence of circularity between the average wage and the minimum wage.
    Keywords: minimum wage, average wage, France
    JEL: E24 J31 J58
    Date: 2013–07
  8. By: Andreoli-Versbach, Patrick; Franck, Jens-Uwe
    Abstract: Tacit collusion reduces welfare comparably to explicit collusion but remains mostly unaddressed by antitrust enforcement which greatly depends on evidence of explicit communication. We propose to target specific elements of firms’ behavior that facilitate tacit collusion by providing quantitative evidence that links these actions to an anticompetitive market outcome. We apply our approach to incidents on the Italian gasoline market where the market leader unilaterally announced its commitment to a policy of sticky pricing and large price changes which facilitated price alignment and coordination of price changes. Antitrust policy has to distinguish such active promotion of a collusive strategy from passive (best response) alignment. Our results imply the necessity of stronger legal instruments which target unilateral conduct that aims at bringing about collusion.
    Keywords: antitrust law; tacit collusion; oligopolistic competition; gasoline market
    JEL: K21 K42 L13 L71 L41
    Date: 2013–07
  9. By: Streeck, Wolfgang
    Abstract: Rising public debt has been widespread in democratic-capitalist political economies since the 1970s, generally accompanied among other things by weak economic growth, rising unemployment, increasing inequality, growing tax resistance, and declining political participation. Following an initial period of fiscal consolidation in the 1990s, public debt took an unprecedented leap in response to the Great Recession. Renewed consolidation efforts, under the pressure of financial markets, point to a general decline in state expenditure, particularly discretionary and investment expenditure, and of extensive retrenchment and privatization of state functions. -- Steigende Staatsverschuldung ist in demokratisch-kapitalistischen Ländern seit den 1970er-Jahren verbreitet. Üblicherweise ist sie verbunden mit niedrigem Wirtschaftswachstum, steigender Arbeitslosigkeit, wachsender Ungleichheit, zunehmender Steuerfeindlichkeit sowie einem Rückgang politischer Beteiligung. Auf eine Phase anfänglicher fiskalischer Konsolidierung in den 1990er-Jahren folgte, in Reaktion auf die Große Rezession, ein sprunghafter Anstieg der öffentlichen Schulden. Die unter dem Druck der Finanzmärkte wieder aufgenommenen Konsolidierungsbemühungen lassen eine generelle Kürzung der Staatsausgaben - vor allem solcher diskretionärer und investiver Art - und darüber hinaus eine weitgehende Beschneidung und Privatisierung von Staatsaufgaben erwarten.
    Date: 2013
  10. By: Jakob de Haan; Razvan Vlahu
    Abstract: This paper reviews the empirical literature on the corporate governance of banks. We start by highlighting the main differences between banks and non-financial firms and focus on three characteristics which make banks special: (i) regulation, (ii) the capital structure of banks, and (iii) the complexity and opacity of their business and structure. Next, we discuss the characteristics of corporate governance in banks and how they differ from the governance of non-financial firms. We then review the evidence on three governance mechanisms: (i) boards, (ii) ownership structures, and (iii) executive compensation. Our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions, such as the positive (negative) association between board independence (size) and performance, do not hold for banks. Also, existing work provides less than conclusive results regarding the relation between different governance mechanisms and various measures for banks’ performance. We discuss potential explanations for these mixed results.
    Keywords: banking; governance; boards; bank ownership; executive remuneration
    JEL: G21 G34 G35
    Date: 2013–07
  11. By: Hall, Stephen G; Ahmad, Mahyudin
    Abstract: The consensus in growth literature has recognized the significant effects of institutions (including social capital and political institutions) towards economic growth. Utilizing the World Value Survey (WVS)’s trust variable that has often been used to represent social capital, and employing panel data technique which hitherto has been very limited in social capital studies, this study shows that WVS’ trust data suffer severe missing observation problem and the panel fixed effect estimation using such data produce highly unrobust results. Future research in social capital therefore needs to expand their measure of social capital beyond the WVS trust indicator. The results also indicate that political institutions effect on growth could possibly occur indirectly via property rights channel.
    Keywords: Trust; Social Capital; Property Rights; Economic Growth;
    JEL: O43 Z13
    Date: 2013–05
  12. By: Federico Etro (Department of Economics, University Of Venice Cà Foscari); Elena Stepanova (S. Anna School of Advanced Studies, Pisa)
    Abstract: We analyze the price of paintings in Dutch inventories and auctions of the Golden Age. The econometric investigation emphasizes correlations between prices adjusted for inflation and characteristics of the paintings, of the painters, of the owners (job, religion, size of the house) and, in case of auctions, also of the buyers. Price differentials for alternative genres, for the characteristics of the traders and the purpose of the inventory tend to disappear after con-trolling for the unobservable quality of paintings with artists fixed effects. The real price of a representative painting declined over the XVII century. We argue that initial high prices were the fruit of the large increase in demand by the Dutch middle class, which attracted endogenous entry of painters. This led to intense competition and the development of cost-saving innovations for mass production (high specialization in genres, smaller paintings, monochromatic styles) so as to gradually reduce prices. We also run a multinomial probit model to verify the Montias hypothesis on the location of paintings between rooms of Dutch houses.
    Keywords: Art market, Endogenous entry, Dutch Golden Age, Hedonic pricing analysis
    JEL: Z11 N0 D4
    Date: 2013
  13. By: Fabio Campanini (DISCE, Università Cattolica); Serena Costa (DISCE, Università Cattolica); Paolo Rizzi (DISCE, Università Cattolica)
    Abstract: The machine tool industry has a leading role in the Italian manufacturing system, above all in Northern Italy. This industrial branch is a strategic intermediate point in many manufacture dies, with an average innovation intensity higher than that of many other industrial branches. This work investigates if and in which way the innovation and the R&D processes carried out in the sector firms affect their productivity. We built a significant sample, which answered a questionnaire based on the CIS (Community Innovation Survey). Also a regional geographic dimension is used, to test the presence of specific local effects. Results show a positive and strong contribution from human capital to productivity, while, in the short term, physical capital have a negative impact, a result probably influenced by the economic crisis.
    Keywords: Innovation; Machine tool industry; Firm productivity; Regions.
    JEL: L1 L64 O3
    Date: 2013–05
  14. By: Renuka Sane (Indira Gandhi Institute of Development Research); Susan Thomas (Indira Gandhi Institute of Development Research)
    Abstract: In December 2010, the Indian state of Andhra Pradesh passed a law that severely restricted the operations of micro-finance institutions and brought the micro-finance industry to an abrupt halt. We measure the impact of micro-credit withdrawal in this unique natural experiment and find that average household expenditure dropped by 19 percent relative to a control group after the ban. The largest decrease was observed in expenditure on food. There is some evidence of higher volatility in consumption after the ban. All households were affected and not just the borrower households, which may suggest general equilibrium effects.
    Keywords: Consumption smoothing, credit, household finance, micro-finance ban, natural experiment
    JEL: D14 G21 G28
    Date: 2013–07

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