nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2019‒10‒28
twenty-one papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. The Econ in Econophysics By Anwar Shaikh
  2. "The Macroeconomic Loss Due to Violence against Women and Girls: The Case of Ghana" By Srinivas Raghavendra; Kijong Kim; Sinead Ashe; Mrinal Chadha; Felix Asante; Petri T. Piiroinen; Nata Duvvury
  3. A new developmentalist model of structural change, economic growth and middle-income trap By Jose Luis Oreiro; Kalinka Martins da Silva
  4. Ethical regulation in business managers decision making By Arie Reshef
  6. An Economic Approach To The Self : The Dual Agent By Aïleen Lotz
  7. Créer un espace d'entrepreneuriat culturel et créatif : le cas du Centquatre By Aurore Haas; Alexis Pokrovsky
  9. Keynes und die Finanzmärkte. Auf halbem Weg vom "homo oeconomicus" zum "homo humanus" By Stephan Schulmeister
  10. The rise of corporate net lending among G7 countries: a firm-level analysis By Davide Villani
  11. Econoquantumphysics and econonetwork: do correlations and eigenstates shape the taxonomy of the cryptocurrency market? By Carlo Requi\~ao da Cunha; Roberto da Silva
  12. Eco-efficiency analysis in generalized IO models: Methods and examples By Gurgul, Henryk; Lach, Łukasz
  13. #EleNão: Economic crisis, the political gender gap, and the election of Bolsonaro By Laura Barros; Manuel Santos Silva
  14. The Business Model of Social Banks By Simon Cornée; Panu Kalmi; Ariane Szafarz
  16. L’habitat se transforme, mais la précarité augmente By Jean-Pierre Lévy
  17. Resilienza, innovazione e crescita: un modello teorico By Andrea Salustri
  18. Modelling Minskyan financial cycles with fundamentalist and extrapolative price strategies: An empirical analysis via the Kalman filter approach. By Filippo Gusella
  19. Adaptive-Aggressive Traders Don't Dominate By Daniel Snashall; Dave Cliff
  20. Empirical evidence of systemic tail risk premium in the Johannesburg Stock Exchange By Kouadio, Jean Joel; Mwamba, Muteba; Bonga-Bonga, Lumengo
  21. The Chilean economy since the return to democracy in 1990. On how to get an emerging economy growing, and then sink slowly into the quicksand of a “middle-income trap” By Palma, J. G.

  1. By: Anwar Shaikh (Department of Economics, New School for Social Research)
    Abstract: Modern authors have identified a variety of striking economic patterns, most importantly those involving the distribution of incomes and profit rates. In recent times, the econophysics literature has demonstrated that bottom incomes follow an exponential distribution, top incomes follow a Pareto, profit rates display a tent-shaped distribution. This paper is concerned with the theory underlying various explanations of these phenomena. Traditional econophysics relies on energy-conserving “particle collision” models in which simulation is often used to derive a stationary distribution. Those in the Jaynesian tradition rely on entropy maximization, subject to certain constraints, to infer the final distribution. This paper argues that economic phenomena should be derived as results of explicit economic processes. For instance, the entry and exit process motivated by supply decisions of firms underlies the drift-diffusion form of wage, interest and profit rates arbitrage. These processes give rise to stationary distributions that turn out to be also entropy maximizing. In arbitrage approach, entropy maximization is a result. In the Jaynesian approaches, entropy maximization is the means.
    Keywords: Economics, arbitrage, econophysics, income distribution, profit distribution, statistical mechanics, Jaynes
    Date: 2019–10
  2. By: Srinivas Raghavendra; Kijong Kim; Sinead Ashe; Mrinal Chadha; Felix Asante; Petri T. Piiroinen; Nata Duvvury
    Abstract: Violence against women and girls (VAWG) is a widely recognized human rights violation with serious consequences for the health and well-being of women and their families. However, the wider ramifications of VAWG for businesses, communities, economies, and societies are only recently being recognized. Despite this recognition, there are few studies exploring how the economic and social impacts of VAWG affect economic growth, development, and social stability. In this paper, applying the social accounting approach, we outline the ripple effects of VAWG from the individual micro-level impacts to the macroeconomy. Our analysis shows the loss due to VAWG amounts to about 0.94 percent of Ghanaian GDP and is a permanent invisible leakage from the circular flow of the economy. The analysis also shows that the loss due to violence is not just a one-off leakage from the macroeconomic circular flow and explores the potential consequences of the multiplier loss due to VAWG over a period of time. The cumulative loss is sizeable and inflicts a premium on GDP growth over time--in simple terms, inaction today in addressing VAWG for cost considerations will impose a larger cost premium on economic growth, which will constrain tomorrow's resources.
    Keywords: Violence against Women and Girls; Social Accounting Matrix; Productivity Loss; Economic Growth
    JEL: E16 E19 J16 B54 O55
    Date: 2019–10
  3. By: Jose Luis Oreiro (Universidade de Brasília (BR)); Kalinka Martins da Silva
    Abstract: Despite the growing literature on new developmentalism published in the last 5 years, which includes a textbook published in 2015, up to now the ideas of the Brazilian New Developmentalist School were no longer presented in terms of a coherent formal growth model. The main objective of the present article is precisely to fulfill this gap, presenting a formal model of structural change and economic growth according to the New Developmentalism theoretical propositions. The model to be presented here is, in a large sense, a synthesis between ideas presented by the Classical Development Theory and Post Keynesian Theory of Demand Led-Growth and can be used to explain the Middle-Income Trap (MIT), in which many developing countries seems to be stuck. According to Glawe and Wagner (2016) a MIT usually refers to countries that have experienced rapid growth and thus quickly reached middle-income status, but then failed to overcome that income range to further catch up to the developed countries. That was precisely the case of middle-income Latin American countries such as Brazil and Argentine. New developmentalism asserts that a MIT can occur in countries where Dutch disease suddenly appears due to the discovery of natural resources (for example, new petroleum reserves in Brazil after 2006) or ceased to be neutralized and/or the adoption of an external savings growth strategy. In both cases, real exchange rate overvaluation is the ultimate consequence of a class coalition between workers and the rentier class that favors exchange rate appreciation due to its positive effects over inflation and real wages, on one hand; and financial income, on the other (Bresser-Pereira, 2015).
    Keywords: New Developmentalism, Demand-Led Growth, Structural Change and Real Exchange Rate
    JEL: O11 O14 O40
    Date: 2019–10
  4. By: Arie Reshef (Sir Harry Solomon School of Management, Western Galilee College)
    Abstract: Recently there has been increasing interest in understanding how decisions that have ethical components are made in organizations and what considerations are taken in resolving these ethical issues. In each and every day business leaders must make ethical decisions that involve choises between two or more courses of actions, each of which is a complicated bundle of ethical responsibilities, personal commitment, moral hazard and practical pressures and constrains (Badaracco 1997). On the personal level those managers has to reconcile between the requirement of achieving and preserving managerial success (professional self) and between ethical demands of which they, as responsible persons and distinguished member of the community (moral self) , are ,or ought to be aware. (Ulrich & Thielemann 1993).Consequently there is an urgent need to understand more fully the ethical decision making process of business leaders in complex competitive environment they face every day. The objectives of the current study are: A. To explore, how do business leaders, reconcile between achieving managerial and economic success, with ethical demands and responsibilities in a competitive turbulent business environment. B. To describe decisions patterns of business managers in resolving ethical issues.The moral balance model (Nisan,1991) offers a description of the principles underlying moral choice. Decisions concerning moral behavior (and judgments of other?s moral behavior) are affected by the perceived moral status of the actor and include some sort of quantitative weighing of the morally relevant actions performed by the actor in the recent past. Accordingly, a moral decision as to whether to allow oneself or another, to deviate from what is perceived as correct moral behavior, will be affected by one?s perception of actor?s moral balance.In an open interview 40 Israeli CEO were asked to describe two moral issues they encountered during the present working year and to explain the reasons for course of actions they chose for resolving those issues. content analysis of the interviews reveals narratives which are consistent with the propositions of moral balance model. The results suggest that when making moral evaluations and decisions, business leaders take into account, previously relevant behavior by considering their own level of moral balance within a given time span. The present study provide comprehensive explanation of moral decision making of business leaders in a complicated business environment and explain the role of emotions in those decisions. A new updated model of ethical decision making in business contexts, is suggested by the author.
    Keywords: Ethical regulation, Business ethics, Ethical decision making
    JEL: A13
    Date: 2019–10
  5. By: Natalia Soboleva (National Research University Higher School of Economics)
    Abstract: Nowadays, in Europe, women do not have lower education as compared to men, but they are often less advantaged in their careers. The study aimed to reveal the association between gender attitudes, achievement motivation and realisation of this achievement motivation among the working women in Europe. According to multilevel regression modelling on European Social Survey (2010) data on employed individuals, women and men with more egalitarian gender attitudes in general have higher achievement motivation and are more likely to be able to influence policy decisions in their organisations. The impact of achievement motivation on the possibility to influence decisions was very strong in all the countries. The models with cross-level interaction showed that in most cases the association between the three aspects are more pronounced in countries with higher female participation in the labor market.
    Keywords: Gender attitudes, gender differences, achievement motivation, cross-country analysis, labour market
    JEL: Z
    Date: 2019
  6. By: Aïleen Lotz (Cerca Trova)
    Abstract: This paper extends the notion of the rational agent in economics by acknowledging the role of the unconscious in the agent's decision-making process. It argues that the unconscious can be modelled by a rational agent with his own objective function and set of information. The combination of both the conscious and unconscious agents is called the dual agent. This dual agent presents rationally biased behaviors that may persist through aggregation and could be potentially measured. It also provides a theoretical approach to the emotionally-driven actions.
    Keywords: dual agent,conscious and unconscious,rationality,multi-rationality,emotions,choices and preferences,multi-agent model,consistency
    Date: 2019–10–13
  7. By: Aurore Haas (Skema Business School - SKEMA Business School); Alexis Pokrovsky (Institut Supérieur du Commerce - ISC PARIS)
    Abstract: Le secteur culturel français est confronté à des bouleversements économiques et institutionnels majeurs. L'entrepreneuriat culturel et créatif semble une voie prometteuse pour répondre à ces enjeux. Cependant, son accompagnement pose question:en effet il suppose de concilier les impératifs de la création artistique avec la logique économique d'exploitation d'une opportunité. Les recherches récentes sur l'accompagnement soulignent la nécessité de créer des dispositifs organisationnels et matériels adaptés permettant de développer les compétences,à l'instar des communautés de makers et des espaces de co-working. Or, la nature matérielle des dispositifs d'accompagnement est peu étudiée. En traitant la nature matérielle sous l'angle de deux dimensions, le lieu et les proximités, notre article se propose ainsi d'étudier le rôle des dispositifs matériels sur l'accompagnement des activités entrepreneuriales dans le cadre d'un incubateur du secteur créatif et culturel.L'étude de cas porte sur un cas unique en France, le 104Factory, un incubateur situé à Paris et rattaché à un établissement culturel, le 104. Notre recherche s'appuie sur une série d'entretiens menés avec des entrepreneurs hébergés au 104Factory. Notre étude met en évidence le rôle ambidextre des proximités et du lieu dans l'accompagnement des entrepreneurs culturels et créatifs.
    Keywords: entrepreneur,accompagnement,proximité,incubateur
    Date: 2018–06
  8. By: Maksim Gladyshev (National Research University Higher School of Economics)
    Abstract: Correct aggregation of individual preferences into collective one is central problem of nowadays Social Choice theory. After the Arrow’s and Gibbard–Satterthwaite impossibility theorems it became clear that our desire to justify an electoral procedure is doomed to failure. At the same time a lot of scholars continued exploring different properties of existing voting rules and constructing the new ones. Contemporary research in this area explore two main properties of aggregation procedures — their degree of manipulability and computational complexity of manipulation. Quantitative evaluations of these properties tend to be main criteria of voting procedure selection. But last decades it turned out that another threat for theory of voting is incompatibilities and unexpected outcomes of different kind, usually called paradoxes. This article provides complete systematization of voting paradoxes known for today. We also presented an attempt to formulate a complete proof of the (in)stability of seven most common used voting rules to paradoxes of any type, which had not been undertaken before. Our results show that different voting procedures are qualitatively different in the sense of vulnerability to voting paradoxes which makes reasonable to propose additional criteria of voting procedure selection and opens the gate for further quantitative research.
    Keywords: Social choice, elections, voting behavior, paradoxes, voting procedures
    JEL: D7
    Date: 2019
  9. By: Stephan Schulmeister
    Abstract: John Maynard Keynes war ein Ökonom, der stets zwischen der Welt der Theorien und der Realität pendelte, er prüfte und verwarf theoretische Annahmen aufgrund seiner Beobachtungen, die er wiederum als Ausgangspunkte für die Entwicklung neuer Theorien nutzte. Gleichzeitig betrieb er als Praktiker keine andere Art von Aktivitäten mit solcher Intensität und Kontinuität wie Finanzgeschäfte aller Art. Diese Erfahrungen machten für Keynes klar, dass ökonomisches Verhalten essentiell durch Unsicherheit, Emotionen und soziale Interaktion geprägt wird. In seiner Darstellung der Handels- und Preisdynamik auf Finanzmärkten (sie nimmt die wichtigsten Entwicklungen seit den 1970er-Jahren vorweg) entwirft er ein zum "homo oeconomicus" in radikalem Gegensatz stehendes Menschenbild. Allerdings hat er diese realitätsnahe Mikro-Fundierung seiner Makroökonomie nicht theoretisch ausformuliert, denn dann hätte er das gesamte Theoriegebäude der Neoklassik explizit verwerfen müssen. Dies aber hätte dem Hauptziel seiner "General Theory" widersprochen, seine "fellow economists" mit seiner Beschäftigungs-, Zins- und Geldtheorie dort abzuholen, wo sie sich befanden.
    Date: 2019–10–24
  10. By: Davide Villani
    Abstract: In recent decades, corporate net lending has been increasing in several developed countries. This paper discusses the impact of financialisation and income distribution on the level of corporate net lending among G7 countries. We argue that financialisation affects the level of corporate net lending through firms' re-organisation towards a model of accumulation based on the maximisation of “shareholder value” and through the negative impact on investment. Moreover, the reduction in the wage share can increase the capacity of accumulation of liquidity of corporations, increasing the gap between corporate savings and investment, leading to the rise in net lending. We test our hypotheses using panel data of publicly listed non-financial corporations for the period 1990-2015. According to our findings, the process of financialisation has a positive impact on the level of net lending after 2001, while the wage share at the firm-level has a strong negative impact on the level of net lending throughout the whole period.
    Keywords: Net lending, Financialisation, Functional income distribution, Firm-level analysis
    JEL: E21 G30 O16
    Date: 2019–10
  11. By: Carlo Requi\~ao da Cunha; Roberto da Silva
    Abstract: We investigate 17 digital currencies making an analogy with quantum systems and develop the concept of eigenportfolios. We show that the density of states of the correlation matrix of these assets shows a behavior between that of the Wishart ensemble and one whose elements are Cauchy distributed. A metric for the participation matrix based on superposition of Gaussian functions is proposed and we show that small eigenvalues correspond to localized states. Nonetheless, some level of localization is also present for bigger eigenvalues probably caused by the fat tails of the distribution of returns of these assets. We also show through a clustering study that the digital currencies tend to stagger together. We conclude the paper showing that this correlation structure leads to an Epps effect.
    Date: 2019–10
  12. By: Gurgul, Henryk; Lach, Łukasz
    Abstract: Performance assessment in the presence of undesirable outputs, such as pollutant emissions, is usually modelled within the framework of data envelopment analysis (DEA). In this paper we propose a new approach to measuring eco-efficiency in generalized input-output (gIO) models which may be used as a supplementary method to traditional DEA. Unlike DEA this approach takes into account detailed data on intersectoral flows in supply- and demand-driven gIO models. We focus on cases of traditional and sector-size-adjusted measures of interindustry linkages in gIO models and in each case we suggest respective indices of eco-efficiency and prove their usefulness in policymaking. In order to illustrate possible applications of the new approach we conduct an empirical analysis aimed at identifying the eco-efficient sectors based on the 1995 and 2009 national input-output tables and environmental accounts for Poland which are provided by the World Input Output Data (WIOD) database.
    Keywords: generalized input-output models, intersectoral linkages, eco-efficiency, nonlinear optimization
    JEL: C5 O1 Q3
    Date: 2019–01–01
  13. By: Laura Barros (University of Goettingen / Germany); Manuel Santos Silva (University of Goettingen / Germany)
    Abstract: After more than one decade of sustained economic growth, accompanied by falling poverty and inequality, Brazil has been hit by an economic recession starting in 2014. This paper investigates the consequences of this labor market shock for the victory of far-right Jair Bolsonaro in the 2018 presidential election. Using a shiftshare approach and exploring the differential effects of the recession by gender and race, we show that heterogeneity in exposure to the labor demand shock by the different groups is a key factor explaining the victory of Bolsonaro. Our results show that male-specific labor market shocks increase support for Bolsonaro, while female-specific shocks have the opposite effect. Interestingly, we do not find any effect by race. We hypothesize that, once facing economic insecurities, men feel more compelled to vote for a figure that exacerbates masculine stereotypes, as a way of compensating for the loss in economic status. Women, on the other hand, when confronted with economic shocks and the prospect of Bolsonaro’s election, respond by rejecting his political agenda in favor of a more pro-social platform.
    Keywords: economic shocks, populism, gender, voter participation
    JEL: D72 J16 J23 P16 R23
    Date: 2019–08–15
  14. By: Simon Cornée (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Panu Kalmi (University of Vaasa - University of Vaasa); Ariane Szafarz (Centre Emile Bernheim - ULB - Université Libre de Bruxelles [Bruxelles] - SBS-EM, ULB - Computer Science Department [Bruxelles] - ULB - Université Libre de Bruxelles [Bruxelles])
    Date: 2019–10–17
  15. By: Lilis Sulastri (Faculty of Social and Political Sciences, UIN Sunan Gunung Djati Bandung)
    Abstract: Islamic work ethics is a concept of ethics that is based on Islamic teaching and principle which rely on faith. Islamic ethics is a principle of right and wrong which designate to demonstrate what human ought to do taught Quran and shown in the great life of the Prophet Muhammad. This study investigated the influence of Islamic work ethic on intrinsic motivation, organizational culture and job performance in Islamic College in Indonesia. This study used a quantitative model, and it uses a sample of 150 employees of Islamic University in Bandung, Indonesia. Empirical results show that the Islamic work ethic greater effect on intrinsic motivation and organizational culture than their effects on job performance. Furthermore, empirical results suggest intrinsic motivation moderates the relationship of the Islamic work ethic on performance, and organizational culture moderates the relationship of the Islamic work ethic on performance.
    Keywords: Islamic college; Islamic work ethic; Intrinsic motivation; Organizational culture; Performance
    JEL: F15 O52
    Date: 2019–10
  16. By: Jean-Pierre Lévy (LATTS - Laboratoire Techniques, Territoires et Sociétés - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - UPEM - Université Paris-Est Marne-la-Vallée)
    Abstract: Ce chapitre présente une modélisation prospective à l'horizon 2033 de l'évolution du système d'habitat français. Le modèle « Analyse des Systèmes d'Habitat (ASHA°) », permet de reconstituer ce système et de mesurer l'impact de l'offre de logements sur la redistribution des populations (concentration, mixité, gentrification…) à une échelle et une durée données. En tenant compte des positions sociales et démographiques des logements dans le système national, les résultats de ces simulations montrent les blocages du fonctionnement du système actuel. Ils permettent de souligner que son évolution ne sera pas en mesure d'enrayer le mal-logement et que celui-ci risque fort de s'accentuer dans les années à venir. En particulier, ils montrent les risques de diffusion des difficultés à se loger pour la majeure partie des jeunes ménages, et d'un cloisonnement social plus affirmé du parc immobilier.
    Keywords: Habitat,Logement,Mobilités résidentielles,Chaînes de vacances des logements,Modélisation,Précarisation
    Date: 2019–08
  17. By: Andrea Salustri (Università Sapienza di Roma - Dipartimento di Studi Giuridici, Filosofici ed Economici)
    Abstract: L’implementazione dell’Agenda 2030 implica l’attivazione di un processo di resilienza trasformativa come condizione necessaria ma non sufficiente a sostenere lo sviluppo sostenibile dei territori. In mancanza di capacità di resilienza, i processi di innovazione possono determinare, come effetto collaterale indesiderato, un aumento delle disuguaglianze e dei conflitti nel breve periodo, nonchè la maturazione di forme di path dependency nel lungo periodo che potrebbero mettere a rischio la sostenibilità delle scelte di sviluppo effettuate. D’altra parte, in assenza di capacità di innovazione, le forme di resilienza potrebbero favorire uno scambio iniquo tra obiettivi di breve e di lungo periodo, creando nuove vulnerabilità ed alimentando retroazioni negative a detrimento dello sviluppo. Sulla base di tali premesse, il collegamento tra gli Obiettivi di sviluppo sostenibile (SDGs) e l’economia sociale e solidale (ESS) sembra essere in grado di promuovere l’adozione di approcci sinergici ed integrati in grado di connettere le dinamiche globali e le dinamiche locali a beneficio di uno sviluppo socio-economico-territoriale sostenibile. A sostegno del quadro di riferimento logico delineato, la ricerca presenta un modello macroeconomico di crescita con progresso tecnologico endogeno opportunamente modificato per tener conto del ruolo dell’ESS nell’ambito di un processo di crescita economica orientato al perseguimento degli Obiettivi di sviluppo sostenibile.
    Keywords: Sviluppo sostenibile, Economia sociale e solidale, crescita economica.
    JEL: A12 O43 Q01
    Date: 2019–10
  18. By: Filippo Gusella
    Abstract: In this paper we empirically analyse Minskyan financial cycles in asset prices, where the cycles are driven by the presence of two unobserved evaluation price strategies: the fundamentalist and the extrapolative price strategy. To achieve this, we construct a model, that incorporates the two behavioural equations and we investigate the financial cycles via a state space model. Using the Kalman filter, the conditions for the existence of cycles can be evaluated empirically. The model is estimated for four OECD countries using the times series of equity and housing prices over the period 1970-2017 for annual data. We find evidence of cycles in the equity market for the UK, France, Germany and the USA. Regarding housing prices, we find evidence of cyclical fluctuations in the UK, France and the USA but not in Germany. For both the equity market and the housing market, we find the highest price overshooting in the UK and the USA. Our results provide empirical support for the Minskyan theory, highlighting the role of the evaluation effect for an endogenous generation of cyclical phenomena in asset prices.
    Keywords: Minsky cycles, asset prices, financial instability hypothesis, state space model, Kalman Filter
    Date: 2019
  19. By: Daniel Snashall; Dave Cliff
    Abstract: For more than a decade Vytelingum's Adaptive-Aggressive (AA) algorithm has been recognized as the best-performing automated auction-market trading-agent strategy currently known in the AI/Agents literature; in this paper, we demonstrate that it is in fact routinely outperformed by another algorithm when exhaustively tested across a sufficiently wide range of market scenarios. The novel step taken here is to use large-scale compute facilities to brute-force exhaustively evaluate AA in a variety of market environments based on those used for testing it in the original publications. Our results show that even in these simple environments AA is consistently out-performed by IBM's GDX algorithm, first published in 2002. We summarize here results from more than one million market simulation experiments, orders of magnitude more testing than was reported in the original publications that first introduced AA. A 2019 ICAART paper by Cliff claimed that AA's failings were revealed by testing it in more realistic experiments, with conditions closer to those found in real financial markets, but here we demonstrate that even in the simple experiment conditions that were used in the original AA papers, exhaustive testing shows AA to be outperformed by GDX. We close this paper with a discussion of the methodological implications of our work: any results from previous papers where any one trading algorithm is claimed to be superior to others on the basis of only a few thousand trials are probably best treated with some suspicion now. The rise of cloud computing means that the compute-power necessary to subject trading algorithms to millions of trials over a wide range of conditions is readily available at reasonable cost: we should make use of this; exhaustive testing such as is shown here should be the norm in future evaluations and comparisons of new trading algorithms.
    Date: 2019–10
  20. By: Kouadio, Jean Joel; Mwamba, Muteba; Bonga-Bonga, Lumengo
    Abstract: This paper assesses the impact of systematic tail risk of stocks, defined as a stock’s exposure to market tail events, on the cross section returns of an emerging stock exchange, especially the Johannesburg Stock Exchange (JSE) from January 2002 through June 2018. If stock market investors are crash-averse, then holding stocks that experience high exposure to market tail events should be rewarded with a premium. The paper therefore sets out to determine whether high exposure to market tail events translates into higher returns of stocks traded on the JSE. To achieve this objective, the study extends on the work of Chabi-Yo, Ruenzi and Weigert (2015) based on extreme value theory (EVT) and copula models as well as the traditional asset pricing tools of portfolio formation and cross-sectional regressions. The results of the empirical analysis support the existence of a systematic tail risk premium in the JSE. Interestingly, the effect of systematic tail risk on the cross section of JSE returns is time-varying and independent from that of risk measures such as beta and downside beta and firm characteristics such as book-to-market (BTM) ratio, size and past returns. In addition, the study provides evidence on the impact of financial crises on crash aversion.
    Keywords: systematic tail risk, stock exchange, extreme value theory, copula
    JEL: C46 G01 G12
    Date: 2019–10–12
  21. By: Palma, J. G.
    Abstract: The main hypothesis of this paper is that the Chilean economy's poor performance over the last two decades (e.g., average productivity growth collapsed by three quarters vis-à-vis the previous cycle) results from its development strategy having run its course -being now in desperate need of a full “upgrade” (one capable of generating new engines of productivity growth; e.g., the industrialisation of commodities, a “green new deal”, or the spread of the new technological paradigm to the four corners of the economy). The same can be said of the neo-liberal ideology at its foundations, as most of its “absolute certainties” are being shaken to the core. However, neither the (not so) invisible hand of distorted markets, nor centre-left or centre-right governments have had much of a clue as to how to bring this change about. There is also (unlike, say, in some Asian economies) a generalised lack of nerve to do anything about it. Consequently, the Chilean economy is now jammed in a rather transparent -and self-made- “middle-income trap”. In fact, change has come in the opposite direction: in order to reinforce the growingly fragile status quo, a new policy-straightjacket has been added in the form of the Transpacific Treaty, or TPP-11, which gives large corporations (foreign and domestic) a de facto veto against any change in policy. In turn, the advanced countries’ “reverse catching-up” isn’t helping either, as this also helps reinforce the convictions of those in Chile defending the status quo. We are all now indeed converging in the West, north and south, but towards Latin American features such as mobile élites creaming off the rewards of economic growth, and ‘magic realist’ politics that lack self-respect if not originality. In fact, it is now even tempting to say to those in the high-income OECD “Welcome to the Third World”.
    Keywords: Chile, Latin America, emerging Asia, Catching-up, “Reverse catching-up”, Export “upgrading”, Productivity, Immigration, “premature” de-industrialisation, Keynes, Hirschman, Foucault, Neo-liberalism, Inequality, Rent-seeking
    JEL: B52 E20 F13 F53 H54 J20 L52 N16 N66 O16 O40 P50
    Date: 2019–10–16

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