nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2018‒11‒26
twenty-two papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. On the Ricardian Invariable Measure of Value in General Convex Economies By Kurose, Kazuhiro; Yoshihara, Naoki
  2. Is wage labor in highly developed capitalism today still a force of social transformation? By Kronauer, Martin
  3. Math, Girls and Socialism By Quentin Lippmann; Claudia Senik
  4. The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem By Kurose, Kazuhiro; Yoshihara, Naoki
  5. Exploitation, Skills, and Inequality By Cogliano, Jonathan F.; Veneziani, Roberto; Yoshihara, Naoki
  6. Changing gender roles in agriculture? Evidence from 20 years of data in Ghana By Lambrecht, I.; Schuster, M.
  7. The Theory of Exploitation as the Unequal Exchange of Labour By Veneziani, Roberto; Yoshihara, Naoki
  8. The Measurement of Labour Content: A General Approach By Yoshihara, Naoki; Veneziani, Roberto
  9. American Radical Economists in Mao’s China: From Hopes to Disillusionment By Isabella M Weber; Gregor Semieniuk
  10. The Financial Innovation Hypothesis: Schumpeter, Minsky and the sub-prime mortgage crisis By Eugenio Caverzasi; Daniele Tori
  11. Do Globalization, Deregulation and Financialization Imply a Convergence of Contemporary Capitalisms? By Robert Boyer
  12. Financial intermediation cost, rents, and productivity: An international comparison By Guillaume Bazot
  13. New spouse, same chores? The division of household labor in consecutive unions By Miriam Beblo; Anne Solaz
  14. The Dynamics of Exploitation and Inequality in Economies with Heterogeneous Agents By Galanis, Giorgos; Veneziani, Roberto; Yoshihara, Naoki
  15. Classical labour values – properties of economic reproduction By Zachariah, David; Cockshott, Paul
  16. Financial Performance of Local Farm Supply, Marketing Cooperatives, 1997 By Rotan, Beverly L.
  17. Behavioral Finance. Una introducción a los conceptos y aplicaciones By Diego A. Agudelo
  18. Behavioral Finance. Una introducción a los conceptos y aplicaciones By Diego A. Agudelo
  19. Aux origines du capital : Le capital chez Luca Pacioli, entre comptabilité et économie, entre mondes ancien et Moderne By Alexandre Rambaud
  20. Reaganomics: A Historical Watershed By John Komlos
  22. Sources of Inequality in Italy By Roberto Iacono; Marco Ranaldi

  1. By: Kurose, Kazuhiro; Yoshihara, Naoki
    Abstract: This study examines the possibility of an invariable measure of value when price changes induced by income redistribution between profit and wages take place in general convex economies. While Ricardo searched for an invariable measure of value with respect to changes in both the factor income distribution and the technique, Sraffa constructed a standard commodity serving as a measure of the change in a factor income distribution alone by leaving aside the possibility of changes in the size and composition of output and means of production. This study allows for the possibility that a change in factor income distribution involves a change in technique, and proposes an extension of Sraffa’s standard commodity. Then, we show that it serves as an invariable measure of value with respect to the income redistribution, even though it involves a change in technique. Finally, we examine whether the linear distributional relation is preserved.
    Keywords: Ricardo’s invariable measure of value, Sraffa’s standard commodity, Linear relation of factor income distribution, General convex economies
    JEL: B51 D33 D51
    Date: 2018–10
  2. By: Kronauer, Martin
    Abstract: The article deals with the question why in many European countries as well as in the USA significant parts of the working classes today support nationalistic and xenophobic political parties and movements. It reviews two different answers which are currently hotly debated in the political left. One answer refers to an imperial mode of living in highly developed capitalist countries which cuts across class divisions and also includes the working classes. The argument holds that the latter, too, defend their (relative) privileges based on the social and ecological exploitation of the global South. Another answer points to the political and symbolic marginalization of the working classes due to the reign of neoliberalism and the failure of the left to fight it. The turn to the right seems in this light to be a misguided response to the effects of neoliberal globalization on the working-class conditions and the lack of a credible left alternative. The article discusses merits and shortcomings of both answers. It then takes another approach to the issue of the marginalization of the working class, suggests to enlarge the social and political perspective to include a much broader variety of wage labor, and to address their common grievances in order to form new alliances for social transformation. Struggling for a more egalitarian society, the article holds, would also be a necessary step to address the pressing issues of global social exploitation and ecological devastation.
    Keywords: working class,right-wing tendencies,social transformation,wage-labor alliance
    Date: 2018
  3. By: Quentin Lippmann; Claudia Senik
    Abstract: This paper argues that the socialist episode in East Germany, which constituted a radical experiment in gender equality in the labor market and other instances, has left persistent tracks on gender norms. We focus on one of the most resilient and pervasive gender gaps in modern societies: mathematics. Using the German division as a natural experiment, we show that the underperformance of girls in math is sharply reduced in the regions of the former GDR, in contrast with those of the former FRG. We show that this East-West difference is due to girls’ attitudes, confidence and competitiveness in math, and not to other confounding factors, such as the difference in economic conditions or teaching styles across the former political border. We also provide illustrative evidence that the gender gap in math is smaller in European countries that used to be part of the Soviet bloc, as opposed to the rest of Europe. The lesson is twofold: (1) a large part of the pervasive gender gap in math is due to social stereotypes; (2) institutions can durably modify these stereotypes.
    Keywords: Gender Gap in Math, Institutions, German Division, Gender Stereotypes
    JEL: I2 J16 J24 P36 Z13
    Date: 2018
  4. By: Kurose, Kazuhiro; Yoshihara, Naoki
    Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. First, it presents a survey of the literature on Heckscher—Ohlin—Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). In addition, by consulting the Cambridge capital controversies, this paper observes that the validity of the FPET relies crucially on this setting. It does no longer hold whenever capital is assumed to be a bundle of reproducible commodities. This paper also refers to the recent literature on the dynamic HOS trade theory and argues that such studies ignore the difficulties posed by the capital controversies. It thereby concludes that the FPET holds even when capital is modelled as a reproducible factor. In conclusion, the paper suggests the necessity of reconstructing basic theories of international trade without relying on the FPET.
    Keywords: factor price equalisation, global univalence, capital as a bundle of reproducible commodities, reswitching of techniques, capital reversing
    JEL: B51 D33 F11
    Date: 2018–10
  5. By: Cogliano, Jonathan F.; Veneziani, Roberto; Yoshihara, Naoki
    Abstract: This paper uses a computational framework to analyse the equilibrium dynamics of exploitation and inequality in accumulation economies with heterogeneous labour. A novel index is presented which measures the intensity of exploitation at the individual level and the dynamics of the distribution of exploitation intensity is analysed. Various taxation schemes are analysed which may reduce exploitation or inequalities in income and wealth. It is shown that relatively small taxation rates may have significant cumulative effects on wealth and income inequalities. Further, taxation schemes that eliminate exploitation also reduce disparities in income and wealth but in the presence of heterogeneous skills, do not necessarily eliminate them. The inegalitarian effects of different abilities need to be tackled with a progressive education policy that compensates for unfavourable circumstances.
    Keywords: Exploitation, heterogeneous labour, wealth taxes, computational methods
    JEL: B51 C63 D31
    Date: 2018–10
  6. By: Lambrecht, I.; Schuster, M.
    Abstract: Many stylized facts about women in agriculture have been repeated for decades. Did nothing really change? Is some of this conventional wisdom simply maintained over time, or has it always been inaccurate? We use four rounds of cross-sectional data from Ghana to assess some of the facts and to evaluate whether gender patterns have changed over time. We focus on five main themes: land, cropping patterns, market participation, agricultural inputs, and employment. We add to the literature by showing new facts and evidence for more than 20 years. Results show that stylized facts do not always hold, and that some of these facts change over time. We find significant variation in the extent of (changes in) gender discrepancies across themes, different agroecological zones, ethnicities, household types and women s role in the household. Acknowledgement : We thank the United States Agency for International Development (USAID) Funding for their support for this study under the Ghana Strategic Support Program. We are appreciative to the VLIR-UOS scholarship program to provide a research visit grant to Laura Pelleriaux, and we are especially thankful to Miet Maertens from the Division of Bioeconomics of KU Leuven, Belgium, for facilitating the early stages of the research. This work is undertaken as part of the CGIAR Research Program on Policies, Institutions, and Markets (PIM) led by the International Food Policy Research Institute (IFPRI).
    Keywords: Labor and Human Capital
    Date: 2018–07
  7. By: Veneziani, Roberto; Yoshihara, Naoki
    Abstract: This paper explores the foundations of the theory of exploitation as the unequal exchange of labour (UEL). The key intuitions behind all of the main approaches to UEL exploitation are explicitly analysed as a series of formal axioms in a general economic environment. Then, a single domain condition called Labour Exploitation is formulated, which summarises the foundations of UEL exploitation theory, defines the basic domain of all UEL exploitation forms, and identifies the formal and theoretical framework for the analysis of the appropriate definition of exploitation.
    Keywords: Exploitation, Unequal Exchange of Labour, axiomatic analysis
    Date: 2018–10
  8. By: Yoshihara, Naoki; Veneziani, Roberto
    Abstract: This paper analyses the theoretical issues related to the measurement of the amount of labour used in the production of — or contained in — a bundle of goods for general technologies with heterogeneous labour. A novel axiomatic framework is used in order to formulate the key properties of the notion of labour content and analyse its theoretical foundations. The main measures of labour content used in various strands of the literature are then characterised. Quite surprisingly, a unique axiomatic structure can be identified which underlies measures of labour aggregates used in such diverse fields as neoclassical growth theory, input-output approaches, productivity analysis, and classical political economy.
    Keywords: labour content, labour productivity, technical change, axiomatic analysis
    JEL: D57 J24 O33
    Date: 2018–10
  9. By: Isabella M Weber; Gregor Semieniuk (Institute of Management Studies, Goldsmiths, University of London, UK)
    Abstract: American radical economists in the 1960s perceived China under Maoism as an important experiment in creating a new society, aspects of which they hoped could serve as a model for the developing world. But the knowledge of ‘actually existing Maoism’ was very limited due to the mutual isolation between China and the US. This paper analyses the First Friendship Delegation of American Radical Political Economists (FFDARPE) to the People’s Republic of China in 1972, consisting mainly of Union for Radical Political Economics (URPE) members, which was the first visit of a group of American economists to China since 1949. Based on interviews with trip participants as well as archival and published material, this paper studies what we can learn about the engagement with Maoism by American radical economists from their dialogues with Chinese hosts, from their on-the-ground observations, and their reflection upon return. We show how the visitors’ own ideas conflicted and intersected with their perception of the Maoist practice on gender relations; workers’ management and life in the communes. We also shed light on the diverging conceptions of the role for economic expertise between URPE and late Maoism. As the first in-depth study on the FFDARPE we provide rich empirical insights into an ice-breaking event in the larger process of normalization in the Sino- U.S relations, that ultimately led to the disillusionment of the Left with China.
    Keywords: China; socialism and capitalism; transition economics; Maoism
    JEL: B24 N15 N45 O10 P21 P32
    Date: 2018–10
  10. By: Eugenio Caverzasi; Daniele Tori
    Abstract: Neo-Schumpeterian economics inspired by the work of Schumpeter and the financial Keynesianism of Minsky are often regarded as unrelated theoretical strands. In this paper, we try to combine these two literatures building on a parallelism between non-financial and financial firms. We focus on recent financial innovations, highlighting how the evolution experienced by US financial institutions led them to transcend their traditional role of credit providers, shaping as 'producers' of financial products, through securitization. This allows on the one hand to broaden the application of Neo-Schumpeterian insights to the financial sector and, on the other, to provide an original explanation of the so-called sub-prime crisis by applying the Financial Instability Hypothesis of Minsky to the alternative context of financial production. We maintain that the 2007-8 crisis was not the result of an innovation in the real sector, but came from an innovation (or a series of innovations) intrinsic to the financial system itself, which fostered credit creation. We argue that this 'cluster of innovations' can be placed under the label 'securitization', defined as the business of packaging and reselling loans, with repo agreements as the main source of funds.
    Keywords: Minsky, Schumpeter, securitization, financial firms, Great Financial Crisis
    Date: 2018–11–22
  11. By: Robert Boyer (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IDA - Institut des Amériques - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche)
    Abstract: Distinctive political compromises prevailed and explained various brands of capitalism observed from WWII to the early 1990s. Is this key finding by régulation research been still valid given the wide diffusion of common structural changes since the 2000s: slow productivity in the industrialized world, overwhelming impact of finance, rise of inequalities within many Nation-States in response to deregulation, social and political polarization, open conflict between capitalism and democracy, the trading place between mature and emerging economies? These stylized facts challenge most economic theories but they can be explained by an institutionalist and historical approach that also helps in redesigning a relevant macroeconomic approach. Each capitalism brand displays specific complementarities among institutional forms and their growing interactions imply more their complementarity than their frontal competition. Consequently, all capitalisms have been transformed but they do not converge towards a canonical configuration. The rise of nationalist movements may challenge the present international relations but they should not underestimate the economic and social costs of their protectionist strategy.
    Keywords: Capitalism variety,Institutional complementarity,Global finance,Internationalization,Deregulation,National and international inequality,Capitalism and democracy,International relations
    Date: 2018–09
  12. By: Guillaume Bazot (Université Paris 8)
    Abstract: Calculation of the unit cost of financial intermediation for 20 countries from 1970 to 2015 has produced the following results. (i) Most countries’ unit costs decline and converge in the long run. (ii) Unit costs were much higher in the 1970s and 1980s, coinciding with high nominal rates, as confirmed by panel cointegration tests. (iii) Countries’ unit cost aggregation suggests a slight decrease in international unit cost whatever the set of hypotheses used in the calculation. (iv) The break down of unit costs into labor costs, capital costs, and profits shows that most of the decrease stems from reduced input costs. Gross operating surplus and total compensation per output tend to decline while distributed profit per output rises, suggesting increasing intermediation rents per output. (v) The productivity of labor in finance compared to other sectors tends to increase in most countries. (vi) The evidence suggests that most productivity gains have been captured by the financial sector in Canada, the UK, and the US. Elsewhere, productivity gains have benefited the nonfinancial sector through unit cost reduction. (vii) Deregulation is either negatively or not correlated with unit cost. In other words, deregulation is not related to unit cost increases. Finally, the paper discusses the consequences of those results for current debates about finance relative wage changes and inequalities.
    Keywords: Unit cost, deregulation, convergence
    JEL: E3 E4 F3 G2 N2
    Date: 2018–11
  13. By: Miriam Beblo (UHH - Universität Hamburg); Anne Solaz (INED - Institut national d'études démographiques)
    Abstract: This article investigates domestic sphere investments, that is, housework and childcare time, of spouses in two consecutive relationships and aims to identify potential sources of variation. Economic reasoning would predict a learning effect from one partnership to the next, and hence less specialization in the domestic sphere in the second relationship. Prevailing gender norms or institutions, on the contrary, may prevent such adjustments in the division of housework. In a fixed-effects regression analysis with the German SocioEconomic Panel, we compare time allocations of couples whose members experienced two consecutive partnerships from 1991 to 2012. Our results indicate that women's and men's successive matches differ from each other. Women and their new partners tend to reallocate time from housework to childcare while men's individual domestic investment patterns remain similar across unions. Highly educated women conform most to the economic rationale by reducing their marital investments significantly in their next partnership.
    Keywords: divison of domestic labour,Germany,German socio-economic panel data,Domestic work,household chores,childcare,gender
    Date: 2018
  14. By: Galanis, Giorgos; Veneziani, Roberto; Yoshihara, Naoki
    Abstract: This paper analyses the relation between growth, inequalities, and exploitation as the unequal exchange of labour (UE exploitation). An economy with heterogeneous, intertemporally optimising agents is considered which generalises John Roemer's [52, 53] seminal models. First, a correspondence between prots and the existence (and intensity) of UE exploitation is proved in the dynamic context. This result is important, positively, because the prot rate is one of the key determinants of investment decisions, and, normatively, because it provides a link between UE exploitation and the functional distribution of income. Second, it is shown that asset inequalities are fundamental for the emergence of UE exploitation, but they are not sucient for its persistence, both in equilibria with accumulation and growth, and, perhaps more surprisingly, in stationary intertemporal equilibrium paths. Labour-saving technical progress, however, may yield sustained growth with persistent UE exploitation by keeping labour abundant relative to capital. Persistent inequalities in income and labour exchanged arise from the interaction between labour market conditions and dierential ownership of productive assets.
    Keywords: Dynamics, accumulation, exploitation, inequalities
    JEL: D51 D63 C61 E11
    Date: 2018–10
  15. By: Zachariah, David; Cockshott, Paul
    Abstract: We attempt to clarify the meaning of labour value, a concept that originated in classical political economy. Using a modern formalism, we show that labour values are understood as a field property, or equivalently a characteristic accounting property, of economic reproduction. The applicability of the concept is discussed and its relation to productivity, employment, surplus labour and unproductive activities are demonstrated.
    Keywords: classical political economy, labour theory of value
    JEL: B0 C67 P16
    Date: 2018–09–27
  16. By: Rotan, Beverly L.
    Abstract: This report analyzes the balance sheets and income statements of local farm supply and marketing cooperatives, comparing 1996 and 1997 and trends over the past 10 years. The data in this report represent four cooperative sizes and types. Common size income statements and balance sheets are used to compare different cooperative sizes and types. Trends for major balance sheet and income statement items and ratio analysis are used to compare and contrast cooperatives by size and type.
    Keywords: Demand and Price Analysis, Farm Management, Marketing
  17. By: Diego A. Agudelo
    Abstract: En los últimos 30 años Behavioral Finance se ha convertido de un área marginal a un tema recurrente en estudios académicos y de creciente importancia en la práctica de las Finanzas. En este documento pretendo ofrecer una introducción al tema de Behavioral Finance, orientada para estudiantes y profesionales en Finanzas, enfocada en los sesgos cognitivos que con más frecuencia afectan las decisiones financieras. Se parte de una discusión breve de los orígenes sicológicos de los sesgos, y se explican los principales sesgos, incluyendo aquellos basados en heurísticas, los de origen social y los que proceden de limitaciones de procesamiento mental, ilustrándolos con ejemplos de su presencia en Mercados Financieros e Inversiones, y en algunos casos, en Finanzas Corporativas o Personales. Se expone al final porqué los sesgos de Behavioral Finance tienen un efecto importante en los Mercados Financieros, con base en la teoría de los límites al arbitraje.
    Keywords: Behavioral Finance, finanzas comportamentales, sicología del comportamiento financiero, sesgos cognitivos, sesgos basados en heurísticas, sesgos sociales, límites al procesamiento mental, límites al arbitraje
    JEL: D91
    Date: 2018–10–10
  18. By: Diego A. Agudelo
    Abstract: En los últimos 30 años Behavioral Finance se ha convertido de un área marginal a un tema recurrente en estudios académicos y de creciente importancia en la práctica de las Finanzas. En este documento pretendo ofrecer una introducción al tema de Behavioral Finance, orientada para estudiantes y profesionales en Finanzas, enfocada en los sesgos cognitivos que con más frecuencia afectan las decisiones financieras. Se parte de una discusión breve de los orígenes sicológicos de los sesgos, y se explican los principales sesgos, incluyendo aquellos basados en heurísticas, los de origen social y los que proceden de limitaciones de procesamiento mental, ilustrándolos con ejemplos de su presencia en Mercados Financieros e Inversiones, y en algunos casos, en Finanzas Corporativas o Personales. Se expone al final porqué los sesgos de Behavioral Finance tienen un efecto importante en los Mercados Financieros, con base en la teoría de los límites al arbitraje.
    Keywords: Behavioral Finance, finanzas comportamentales, sicología del comportamiento financiero, sesgos cognitivos, sesgos basados en heurísticas, sesgos sociales, límites al procesamiento mental, límites al arbitraje
    JEL: D91
    Date: 2018–10–10
  19. By: Alexandre Rambaud (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Nous étudions ici la question du capital, d'un point de vue comptable et économique, dans la « Summa » de Luca Pacioli, le Père de la comptabilité moderne. Nous proposons une analyse historique du capital avant Pacioli, permettant d'expliciter certains traits saillants de cette notion à l'époque où est rédigée la « Summa ». Nous réalisons ensuite une étude, a priori inédite, du capital dans cet ouvrage : nous mobilisons en effet, dans ce but, certaines parties de la « Summa », en-dehors de la célèbre partie « Particulis de computis et scripturis » où sont présentés théoriquement pour la première fois le capital comptable et la partie double. Notre but est de voir dans quelle mesure Pacioli est un « pont entre deux mondes (ancien et Moderne) » en ce qui concerne la question du capital.
    Keywords: Mots-clés : Luca Pacioli,capital,Modernité,Antiquité,Moyen-Age
    Date: 2018–05–16
  20. By: John Komlos
    Abstract: The socio-economic impact of Reaganomics and its long-run deleterious legacy is documented. The preponderance of data indicate that economic growth was not particularly impressive in the wake of the tax cuts of 1981 or 1986. GDP did snap back to potential but failed to accelerate beyond the rates achieved in prior or subsequent decades. The supposed incentives of supply-side economics failed to materialize. People did not work more, they did not save or invest more than they did before, and the benefits trickled down like molasses and got stuck at the very top of the income distribution. Instead, Reagan’s presidency was a watershed in U.S. economic development in the sense that it reversed many of the accomplishments of the New Deal and inaugurated an era in which low-skilled men’s wages began a long period of decline, and labor’s share of GDP continued to fall. Reagan’s true legacy is a dual economy that accompanied the hollowing out of the middle class, a more business-friendly regulatory and oversight framework for Wall Street that ultimately led to the financial crisis, a stupendous increase in the national debt from 30% to 50% of GDP that put it on a path such that by 2012 it exceeded 100%, anti-statism that contributed to the rise of Trumpism, a remarkable rise in inequality that gave rise to an oligarchy, and the benign neglect of blue-collar workers who eventually became Hillary Clinton’s “deplorables.” Reagan put the economy on a trajectory to ultimately, even if not inevitably, led to the triumph of Trumpism and an economy of malaise.
    Keywords: reaganomics, Trumpism, tax cuts, supply-side economics, trickle-down economics
    JEL: B52 D69 H29 H69 N12 P16
    Date: 2018
  21. By: Ingrid Fasshauer (DICEN IDF - Dispositifs d'Information et de Communication à l'Ère du Numérique - CNAM - Conservatoire National des Arts et Métiers [CNAM] - UPN - Université Paris Nanterre - UPEM - Université Paris-Est Marne-la-Vallée)
    Abstract: En plein essor, l'économie collaborative représente une évolution des modes de consommation, de production, de financement et remet en cause les modèles d'affaires, la relation au travail et donc le management. Or il existe encore peu de recherche sur la gestion des organisations de l'économie collaborative. Cette communication s'intéresse à l'évolution du contrôle dans le cadre de l'économie collaborative. Entre économie marchande et non marchande, imbriquant des parties prenantes multiples autour de relations horizontales de pair à pair, elle remet pourtant en cause les modèles existants. A l'aide de la synthèse des modes de contrôle de Chiapello (1996), nous mettons en évidence les enjeux du contrôle relatifs à l'économie collaborative puis nous testons nos hypothèses sur deux cas, un marchand, un non marchand. L'étude d'une plateforme de financement participatif et d'un living lab dédié au développement territorial en milieu rural nous permet de déterminer les spécificités des systèmes de contrôle de l'économie collaborative. Malgré des différences majeures, les deux études de cas font apparaître des modes de contrôle alternatifs au contrôle classique des résultats, notamment l'importance accordée aux valeurs et aux caractéristiques personnelles des « contrôlés » et nous permettent d'énoncer un certain nombre de propositions sur le design des systèmes de contrôle de l'économie collaborative.
    Keywords: conomie collaborative,contrôle organisationnel,contrôle par les valeurs,tensions,paradoxes
    Date: 2018–05–16
  22. By: Roberto Iacono (Norwegian University of Science and Technology, Norway); Marco Ranaldi (PSE and University Paris 1 Panthéon-Sorbonne, France)
    Abstract: In this article, we study the link between the functional and personal distribution of income, focusing on the case of Italy between 1989 and 2016. To this end, we rely on the novel concept of income composition inequality. Income composition inequality focuses on how unequally the composition of income is distributed across the population. The higher the overall degree of income composition inequality is, the stronger the link between the functional and personal distribution of income. We show that the strength of this link decreased steadily in Italy over the period considered. This result is robust to the use of different definitions of capital and labor and different estimation techniques of the degree of income composition inequality. The implications of this result are twofold. First, fluctuations in the total factor shares of income are having an increasingly weaker impact on income inequality in Italy. Second, Italy is moving towards becoming a multiple sources of income society. Finally, we conceptualize a simple rule of thumb for policy makers seeking to reduce income inequality in the long run: This rule relates fluctuations in the total factor shares and the level of income composition inequality to the specific income source to be redistributed.
    Keywords: Income composition inequality, functional and personal income distribution, Italy.
    JEL: C43 E25 H24
    Date: 2018–10

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