nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2014‒08‒16
ten papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Scarcity self-interest and maximization from Islamic angle By Hasan, Zubair
  2. The Critical Mass Approach to Achieve a Deal on Green Goods and Services: What is on the Table? How Much to Expect? By Jaime de MELO; Mariana VIJIL
  3. Risk management, the subprime crisis and financialisation: the role of risk management in the generation and transmission of the subprime crisis By Sergio Lagoa; Emanuel Leao; Ricardo Barradas
  4. Moving'diversely'towards'the'green'economy.'CO2'abating'techno organisational'trajectories'and'environmental'policy'in'EU'sectors. By Massimiliano Mazzanti; Ugo Rizzo
  5. Financial Innovation and Fragility By Kühnhausen, Fabian
  6. The Impact of Shocks on Gender-differentiated Asset Dynamics in Bangladesh By Rakib, Muntaha; Matz, Julia
  7. Women's Role in the Swiss Economy By Richard Dutu
  8. Protagonist Women By Diana Oya Sawyer; Ashleigh Kate Slingsby
  9. The Power of Stereotyping and Confirmation Bias to Overwhelm Accurate Assessment: The Case of Economics, Gender, and Risk Aversion By Julie A. Nelson
  10. I wanna live my life: Locus of Control and Support for the Welfare State By Ludek Kouba; Hans Pitlik

  1. By: Hasan, Zubair
    Abstract: This paper clarifies some misinterpretations of three foundational concepts in mainstream economics from Islamic viewpoint. These are scarcity of resources, pursuit of self-interest and maximizing behavior of economic agents. It argues that stocks of resources that God has provided are inexhaustible. But important is the availability of resources out of stocks to mankind. Availability is a function of human effort and the state of knowledge about resources over time and space. In that sense resources are scarce in relation to multiplicity of human wants for Islamic economics as well. Self-interest must be distinguished from selfishness. The motive operates on both ends of human existence: mundane and spiritual. Its pursuit does not preclude altruism from human life. Counter interests keep balance in society and promote civility. Islam recognizes the motive as valid. Maximization relates to quantifiable ex ante variables. Uncertainty of future outcomes of actions makes maximization a heuristic but useful analytical tool. The concept is value neutral. What is maximized, how and to what end alone give rise to moral issues. Modified in the light of Shari’ah requirements the three concepts can provide a firmer definition for Islamic economics centered on the notion of falah.
    Keywords: Islamic economics, scarcity, self-interest; maximization, falah
    JEL: B11 D63 D64
    Date: 2014–07
  2. By: Jaime de MELO (Ferdi); Mariana VIJIL (French DG Treasury)
    Abstract: At the Davos forum of January 2014, a group of 14 countries pledged to launch negotiations on liberalising trade in ‘green goods’ (also known as`environmental goods’(EGs)), focussing on the elimination of tariffs for an ‘APEC list’ of 54 products. The paper shows that the ‘Davos group’, with an average tariff of 1.8%, has little to offer as countries have avoided submitting products with tariffs peaks for tariff reductions. Even if the list were extended to the 411 products on the ‘WTO list’, taking into account tariff dispersion, their tariff structure on EGs would be equivalent to a uniform tariff of 3.4%, about half the uniform tariff-equivalent for non EG products. Enlarging the number of participants to low-income countries might be possible as, on average, their imports would not increase by more than 8 percent. However, because of the strong complementarities between trade in Environmental Goods and trade in Environmental Services, these should also be brought to the negotiation table even though difficulties in reaching agreement on their scope are likely to be great.
    JEL: F18 Q56
    Date: 2014–06
  3. By: Sergio Lagoa (Instituto Universitário de Lisboa (ISCTE-IUL), DINAMIA’CET-IUL); Emanuel Leao (Instituto Universitário de Lisboa (ISCTE-IUL), DINAMIA’CET-IUL); Ricardo Barradas (Instituto Universitário de Lisboa (ISCTE-IUL), DINAMIA’CET-IUL)
    Abstract: Over time the financial sector has gained greater relevance in the economy, a phenomenon that some call financialisation. Contrary to the mainstream view, financialisation literature emphasises that risk management by financial corporations will not be socially efficient in a context of deregulated markets and will ultimately lead to an increase of aggregate risk and crises. To assess the validity of such claim, in this paper we review the literature on risk management during the Subprime crisis. These failures fall into three categories: technique and methodology, corporate governance and strategy, and regulation and external factors. These failures can be interpreted in the light of the financialisation perspective, which is therefore a valuable approach when addressing regulatory changes in the financial system.
    Keywords: risk management, financial crisis, financialisation.
    JEL: G01 G18 G21 G28
  4. By: Massimiliano Mazzanti (Dipartimento di Economia e Management, Università  di Ferrara and SEEDS - Sustainability Environmental Economics and Dynamic Studies.); Ugo Rizzo (Dipartimento di Economia e Management, Università  di Ferrara.)
    Abstract: This paper investigates, from ex ante perspectives, potential techno- organisational dynamics aimed at reducing GHG emissions in the EU by 2030 and 2050. We take a qualitative view by exploiting interviews with representatives from principal manufacturing sectors in the EU. The novel value of this analysis is in its focus on 'sectors', which, following neo-Schumpeterian theory, are key 'players' in the technological domain. From a conceptual point of view, we mainly refer to the integrated concepts of sector and national systems of innovation which have consolidated into innovation-oriented evolutionary theory: The EU is characterized by national sector specialisations that emerge from historical developments and markets effects, but also from industrial, innovation and environmental policy effects. In this way this work complements more consolidated quantitative econometric and modelling based analyses, as it presents sector-specific techno-organisational options to help reach the decarbonisation targets. We assess the feasibility of those targets from technological and economic perspectives: specific emphasis is put on the smooth or 'radical' change-driven transition towards a greener economy. Both market and policy factors are considered. The assessment of experts' qualitative responses, together with main outcomes from the literature, shows that heavy industrial sectors share some similarities but also key distinctions in relation to their past and future responses to market and policy dynamics. Their specificities should be taken into consideration when defining the specific design of the future EU policy package for energy efficiency and CO2 abatement at EU and national levels.
    Keywords: techno-organisational change, climate change, EU 2030 2050 targets, sectors, eco-innovations.
    JEL: L52 O33 Q58
    Date: 2014–05
  5. By: Kühnhausen, Fabian
    Abstract: In this paper, I evaluate the impact of innovative activity of financial agents on their fragility in a competitive framework. There exist a vast array of concerns about the interconnection of financial innovations, financial distress of firms and financial crises provided by theoretical arguments. I build on these and assess empirically the causal link between a financial agents' innovativeness and stability. Using a unique data set on financial innovations in the USA between 1990 and 2002, I show that a larger degree of innovation negatively (positively) affects firm stability (fragility) after controlling for the underlying firm characteristics. The results are robust against different modifications of innovation measures and against different fragility parameters indicating profitability, activity risk and risk of insolvency.
    Keywords: Incentives to Innovate; Financial Innovation; Fragility
    JEL: G01 G2 L11 O31
    Date: 2014–06–23
  6. By: Rakib, Muntaha; Matz, Julia
    Abstract: Assets are an important means of coping with adverse events in developing countries but the role of gendered ownership is not yet fully understood. This paper investigates changes in assets owned by the household head,his spouse,or jointly by both of them in response to shocks in rural agricultural households in Bangladesh with the help of detailed household survey panel data. Land is owned mostly by men,who are wealthier than their spouses with respect to almost all types of assets,but relative ownership varies by type of asset. Controlling for unobserved heterogeneity across households and looking at changes within,rather than between,households,we find that weather shocks such as cyclones adversely affect the asset holdings of household heads in general,while predicted external events lead to assets of both spouses being drawn down. The results,furthermore,suggest that jointly owned assets are not sold in response to shocks,either due to these assets being actively protected or due to the difficulty of agreeing on this coping strategy,and that women’s asset holdings and associated coping strategies are shaped by their lower involvement in agriculture.
    Keywords: shocks, assets, gender, ownership, coping strategies, Bangladesh, Consumer/Household Economics, Labor and Human Capital, D13, J16, O12,
    Date: 2014–07
  7. By: Richard Dutu
    Abstract: Swiss women are now as well educated as their male counterparts. However, progress remains to be made in the job market where both the supply and price of female labour are below that of men. While the participation rate for women is high and rising, it is offset by a heavy incidence of part-time work, reflecting both personal preferences and factors that limit their labour supply. The lack and high cost of childcare options for parents, as well as burdensome marginal income tax rates for second earners, create disincentives to work more. A falling but persistent net (i.e. unexplained) wage gap of about 7% in favour of men, coupled with under-representation of women as managers and entrepreneurs, further reduce the incentive for women to take full advantage of their high levels of human capital. Priority should be given to removing those barriers by increasing public spending on childcare and out-of-school-hours care at the cantonal and municipal levels. Existing regulations regarding childcare provision should also be investigated to see whether a broader range of price and quality childcare options is feasible. The implicit tax penalty for married women should also be removed, as the Federal Council is currently considering. More flexibility in working arrangements could further alleviate women’s cost of reconciling work and family life. For instance, facilitating flexi-time, annualised hours, job-sharing, part-time and telework options for both women and men, and creating paternity and/or consecutive, take-it-or-leave-it parental leave could facilitate transition in and out of the labour market. Increasing competition in product markets should help reduce the wage gap by replacing old habits with the hunt for talent regardless of gender. Finally, a corporate governance code in favour of a more equal representation of women in leadership positions, and setting ambitious quantitative targets for women on boards combined with the “Comply or Explain” practise, or quotas, should help remove the so-called glass ceiling. This Working Paper relates to the 2013 OECD Economic Review of Switzerland (
    Keywords: education, Switzerland, labour market, gender, wage gap, leadership
    JEL: H5 I2 J16 J2 J3
    Date: 2014–07–15
  8. By: Diana Oya Sawyer (IPC-IG); Ashleigh Kate Slingsby (IPC-IG)
    Abstract: Protagonist Women highlights examples of women taking the lead in an antagonistic society. The protagonist woman exists on the fault lines of society, championing a now well-established social, cultural and economic revolution. This revolution is aimed primarily at not only garnering women equal rights to men and accounting for historical injustices but carving out a space in society dedicated to tackling the particular challenges faced by women today. In this vein, protagonist women recognise the pluralities of experiences and challenges that exist for women globally. These include biological challenges, those of physical integrity and reproductive health, as well as the challenges and restrictions inflicted by the values and norms of society. This plurality of experiences accounts for the diverse range of issues addressed in this issue of Policy in Focus.
    Date: 2014–03
  9. By: Julie A. Nelson
    Abstract: Behavioral research has revealed how normal human cognitive processes can tend to lead us astray. But do these affect economic researchers, ourselves? This article explores the consequences of stereotyping and confirmation bias using a sample of published articles from the economics literature on gender and risk aversion. The results demonstrate that the supposedly “robust†claim that “women are more risk averse than men†is far less empirically supported than has been claimed. The questions of how these cognitive biases arise and why they have such power are discussed, and methodological practices that may help to attenuate these biases are outlined.
    Keywords: stereotyping, bias, confirmation bias, gender, risk aversion, effect size, index of similarity
    JEL: D83 D03 D81 J16 B41 C9
    Date: 2013–11
  10. By: Ludek Kouba (Department of Economics, Faculty of Business and Economics, Mendel University in Brno); Hans Pitlik (Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, 1030 Vienna, Austria)
    Abstract: The purpose of this paper is to propose a general informal institution determining human ways of thinking and codes of behaviour, thus, in our case, individual support for the Welfare State. For that reason, we recommend employing the two closely related and complementary psychological concepts - locus of control and self-efficacy. We follow a comprehensive concept of the Welfare State, measuring attitudes towards government intervention and income redistribution, using the survey data from the World Values Survey, as well as different indicators for perceived governance quality. Our empirical results show that people with an internal locus of control and high self-efficacy believing in their ability to control their own lives report substantially less positive attitudes towards income equalization and government interventions. Additionally, a higher confidence in government actors and low confidence in major private companies amplify the Welfare State preferences under an external locus of control.
    Keywords: Locus of control, life control, self-efficacy, informal institutions, Welfare State
    JEL: B52 I38
    Date: 2014–07

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