nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2021‒12‒20
nineteen papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Exploration of the Parameter Space in Macroeconomic Agent-Based Models By Karl Naumann-Woleske; Max Sina Knicker; Michael Benzaquen; Jean-Philippe Bouchaud
  2. Varieties of Capitalism and re-thinking the East Asian model of economic growth after the Covid-19 pandemic: Rebalancing shareholder and stakeholder capitalism By Lee, Keun
  3. A Parsimonious Macroeconomic ABM for Labor Market Regulations By Caner Ates; Dietmar Maringer
  4. Investing in a cryptocurrency price bubble: speculative Ponzi schemes and cyclic stochastic price pumps By Misha Perepelitsa
  5. The Old Institutional School and Labour Market Functions and Policies By Drakopoulos, Stavros A.; Katselidis, Ioannis
  6. Capitalism needs a new social contract By Shafik, Minouche
  7. Could transaction-based financial benchmarks be susceptible to collusive behaviour? By Lilian Muchimba
  8. Financialisation of Nature By Tone Smith
  9. Are Green Bond and Carbon Markets in Europe complements or substitutes? Insights from the activity of power firms By Yves Rannou; Mohamed Boutabba; Pascal Barneto
  10. Land-Use Change Driven Biodiversity Loss Under Future Global Socio-Economic and Climate Scenarios By Chaudhary, Abhishek
  11. Mission-oriented innovation policy: From ambition to successful implementation By Lindner, Ralf; Edler, Jakob; Hufnagl, Miriam; Kimpeler, Simone; Kroll, Henning; Roth, Florian; Wittmann, Florian; Yorulmaz, Merve
  12. A time for action on climate change and a time for change in economics By Stern, Nicholas
  13. О возможности эффективного ответа на индустриальный вызов в контексте взаимодействия человека и природы By Tolstoguzov, Oleg
  14. The rise and fall of the energy-carbon Kuznets curve: Evidence from Africa By Shobande, Olatunji; Asongu, Simplice
  15. Collective Bargaining and Social Justice in the Post-Covid Digital Era By Julius, Daniel J.
  16. Managing the distributional effects of environmental and climate policies: The narrow path for a triple dividend By Francesco Vona
  17. The Fallacy in Productivity Decomposition By Simon Bruhn; Thomas Grebel; Lionel Nesta
  18. Pollution Trends and US Environmental Policy: Lessons from the Last Half Century By Joseph S. Shapiro
  19. Green technologies, complementarities, and policy By Nicolo Barbieri; Alberto Marzucchi; Ugo Rizzo

  1. By: Karl Naumann-Woleske; Max Sina Knicker; Michael Benzaquen; Jean-Philippe Bouchaud
    Abstract: Agent-Based Models (ABM) are computational scenario-generators, which can be used to predict the possible future outcomes of the complex system they represent. To better understand the robustness of these predictions, it is necessary to understand the full scope of the possible phenomena the model can generate. Most often, due to high-dimensional parameter spaces, this is a computationally expensive task. Inspired by ideas coming from systems biology, we show that for multiple macroeconomic models, including an agent-based model and several Dynamic Stochastic General Equilibrium (DSGE) models, there are only a few stiff parameter combinations that have strong effects, while the other sloppy directions are irrelevant. This suggest an algorithm that efficiently explores the space of parameters by primarily moving along the stiff directions. We apply our algorithm to a medium-sized agent-based model, and show that it recovers all possible dynamics of the unemployment rate. The application of this method to Agent-based Models may lead to a more thorough and robust understanding of their features, and provide enhanced parameter sensitivity analyses. Several promising paths for future research are discussed.
    Date: 2021–11
  2. By: Lee, Keun
    Abstract: East Asian economies had shown remarkable performance of high growth and low inequality, thereby forming a separate East Asian capitalism group within the VoC typologies. There are strong signs that these economies have recently been converging to the LME group, featuring low growth and high inequality, features shared by East Asian economies since the 2000s. Financialisation is arguably one cause for these outcomes of low growth and high inequality. This paper re-evaluates East Asian capitalism in the context of the Covid-19 pandemic, which has suddenly halted globalisation and further questioned the superiority of shareholder capitalism associated with financialisation and globalisation. It proposes rebalancing between shareholder and stakeholder capitalism. By doing so, East Asian economies can be reborn as a hybrid capitalism, with East Asian capitalism at its original core, to restore their growth momentum in an inclusive way. It is also argued that the post-pandemic retreat of globalisation is a good opportunity to restore autonomy in domestic economic policymaking over interest rates and exchange rates, while imposing some adjustments over formerly excessive capital mobility.
    Keywords: East Asian model; globalization; Covid-19; shareholder capitalism; stake-holder capitalism.
    JEL: F32 F59 O16 O19
    Date: 2020
  3. By: Caner Ates; Dietmar Maringer
    Abstract: The literature on macroeconomic agent-based models (MABMs) has gained growing attention since the early 2000s. Most MABMs dealing with market regulations have been focusing on the financial market. In contrast, only a small number of MABMs investigate the effects of labor market regulations. In this paper, we provide a parsimonious yet extendable agent-based model that focuses on labor market dynamics within a macroeconomic framework, suitable to analyze labor market regulations such as minimum wages and employment protection legislations. The model is stock-flow-consistent and small-scaled, i.e., there are only workers and firms interacting in the goods and in the labor market. There are two different types of workers, namely skilled and unskilled, and firms produce according to a CES production function. This allows for substitutability between the two types of workers. A one-factor-at-a-time (OFAT) sensitivity analysis is performed to gain insights into the mechanisms and patterns produced by the model. Results show that the model is sensitive to the minimum wage parameter and that for reasonable values of the minimum wage, income inequality decreases, while aggregate consumption rises. Overall, the results suggest that the model can be used to further investigate aggregate and distributional effects of labor market regulations.
    Keywords: Labor market; minimum wage; stock-flow consistent; macroeconomic agent-based model; CATS.
    Date: 2021–12–09
  4. By: Misha Perepelitsa
    Abstract: The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as self-organized speculative Ponzi scheme that operates on the platform of a price bubble spontaneously created by traders. The synergy between investors and traders creates an interesting dynamical patterns of the price and systematic risk of the system. We use microscale, agent-based models to simulate the system behavior and derive macroscale ODE models to estimate such parameters as the return rate and total value of investments. We provide the formula for the total risk of the system as a sum of two independent components, one being characteristic of the price bubble and the other of the investor behavior.
    Date: 2021–11
  5. By: Drakopoulos, Stavros A.; Katselidis, Ioannis
    Abstract: The significant role of institutional and non-market factors in the functioning of an economic system was a core theme of the old institutional economists. They also criticised the narrow conception of economic welfare only in terms of efficiency and satisfaction of consumer interests. Instead, they focused on issues related to justice, human self-development and labourers’ welfare. Their conception of the labour market functions is an indicative example of the uniqueness of their approach. In contrast to the standard approach, labour market functioning does not depend only on the price mechanism, but is also affected by other key factors and parameters such as the social norms, several psychological factors and various labour institutions. This chapter seeks to examine and highlight the contribution of the old institutional economics towards labour market functions and policies. After presenting the origins and method of the School, it briefly compares old Institutionalism and early Neoclassical economics focusing on labour market issues. It also discusses the old institutional approach with respect to the collective action and labour market policy. The chapter concludes with Ross-Dunlop debate on labour unions and the case of minimum wages policy in order to emphasize the relevance of early institutional ideas in analysing contemporary labour market issues.
    Keywords: Institutional School; Economic Policy; Labour Policy; Labour Market Institutions
    JEL: B15 B25 J08
    Date: 2021
  6. By: Shafik, Minouche
    Abstract: Capitalism needs a new social contract to better manage the consequences of technology and an increasingly diverse and flexible workforce. That social contract should retain the benefits of flexibility but do a better job of providing security in the form of mandatory benefits, putting a floor on incomes, and investing far more in helping workers adapt to economic shocks and rising automation. It also means a new deal with business that would achieve a more level playing field in how capital and labour are taxed.
    Keywords: capitalism; social contract; labour markets; taxation of capital; OUP deal
    JEL: P00 J08 I38 A13
    Date: 2021–12–01
  7. By: Lilian Muchimba (University of Portsmouth)
    Abstract: Prior to the series of manipulation scandals, financial benchmarks were perceived as a competitive and objective reflection of underlying money markets (Stenfors and Lindo 2018). For example, the manipulation of the London Interbank Offered Rate (LIBOR), underpinning financial contracts worth trillions of dollars was unthinkable. To prevent manipulation, financial market regulators around the world have recommended a paradigm shift from estimation-based to transaction-based financial benchmarks. This shift is based on the mainstream economic view that financial benchmarks anchored on actual transactions are not susceptible to anticompetitive behaviour. However, unlike auction markets, underlying interbank money markets have unique features. As most activity takes place over-the-counter, they are opaque and are governed by conventions, trust and reciprocity. This complicates the achievement of competitive pricing. Using a novel dataset from Bank of Zambia, this paper makes an empirical investigation into transaction-based benchmarks’ susceptibility to anticompetitive behaviour. Additionally, it contributes to the theoretical understanding of transaction-based financial market benchmarks. The study reflects on financial market regulators’ recommendation to transit from estimation-based to transaction-based financial market benchmarks. Further, the study is of interest to central bankers, as short-term interbank rates are the first stage of the monetary transmission mechanism.
    Keywords: Bank of Zambia; banks; collusion; LIBOR; monetary transmission mechanism; reference rates
    JEL: B52 E43 E52 G15 G28
    Date: 2021–12–14
  8. By: Tone Smith
    Abstract: The ‘financialisation of nature’ is related to a shift in environmental governance—from regulation to marked-based approaches—involving strong state support to facilitate the establishment of ‘innovative financial instruments’ and markets related to nature. Although innovative finance got a bad reputation after the 2008 financial crisis, they are strongly encouraged in the environmental policy domain and supported by actors such as UNEP or the CBD. This paper explains the theoretical underpinning and the process of establishing such financial instruments, focusing in particular on offsetting and related ideas such as ‘net-zero’ calculations and ‘nature-based solutions’. It explains how natural entities are converted into abstract units of equivalence to allow the establishment of schemes for tradable ‘nature credits’ (supposedly) compensating damage across time and space. The financialisation of nature is then analysed and critiqued with respect to its lack of environmental effectiveness, its problematic socio-economic consequences and its impact on human-nature relationships. Instead of dealing with the environmental problems at hand, the conversion of nature into financial assets simply turns nature into objects of investment and speculation, while simultaneously creating a potential for financial bubbles.
    Keywords: environmental governance, innovative financial instruments, natural capital, offsetting, biodiversity banking, mitigation hierarchy, net zero, nature-based solutions, restoration of nature
    JEL: D6 E44 F54 G10 Q01 Q2 Q57
    Date: 2021
  9. By: Yves Rannou (CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020], Groupe ESC Clermont); Mohamed Boutabba (Université Paris-Saclay, Univ Evry, EPEE); Pascal Barneto (IAE - IAE BORDEAUX - Université Montesquieu - Bordeaux 4, IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux)
    Abstract: This paper studies the interactions between the European carbon and green bond markets from the lens of the European power firms' trading activity over an eight-year period (2013-2020). Those power firms have used two segments of carbon markets differently: one for shortterm hedging and speculative purposes and one for long-term hedging needs. The second one is found to have an informational advantage over the other and complements it. Interestingly, we show that power firms have used the green bond market as a complement to the carbon futures market used for their short-term hedging or speculative activities. Instead, they have employed the green bond market as a substitute for the carbon futures market used for their long-term hedging activities since 2018. Taken together, our results shed light on a pivotal change in the behaviour of European power firms that progressively abandon the carbon market to issue more green bonds in order to finance their transition to clean energy production systems.
    Keywords: Carbon Market,Futures Hedging,Green Bond Market,Power firms,Substitute,Complement
    Date: 2021–12–01
  10. By: Chaudhary, Abhishek
    Keywords: Land Economics/Use, Environmental Economics and Policy
    Date: 2021–08
  11. By: Lindner, Ralf; Edler, Jakob; Hufnagl, Miriam; Kimpeler, Simone; Kroll, Henning; Roth, Florian; Wittmann, Florian; Yorulmaz, Merve
    Abstract: The major problems facing society, the so-called »Grand Challenges«, call for mission-oriented innovation policy. We aim to make a conceptual contribution here and identify the main components.
    Date: 2021
  12. By: Stern, Nicholas
    Abstract: In this paper, Nicholas Stern argues that the COVID-19 and climate crises, and the weaknesses that produced them, should be tackled together and that the response must be a new sustainable, resilient and inclusive approach to growth and development. The paper explores relevant policies and actions and then turns to the changes to economics necessary to pursue these ideas and imperatives. The core finding of The Economics of Climate Change: The Stern Review – that the costs of inaction on climate change are much greater than the costs of action – was compelling when the Review was published in 2006; 15 years on it is even stronger. While greenhouse gas emissions have continued to rise and the impacts of climate change have manifested faster and with greater intensity than expected, the costs of clean energy technologies have been falling further and more quickly than anticipated. Any reasonable estimate of the costs of inaction would be still higher now, and the costs of action lower, than in 2006. The deeper understanding of the problem that we now have, the paper argues, implies that we must shift the focus of our economic analyses towards the dynamics of change, the fostering of investment and innovation necessary, the management of disruption, and the great opportunities that lie in a new form of development.
    JEL: J1
    Date: 2021–10–26
  13. By: Tolstoguzov, Oleg
    Abstract: Показано, что естественные рентообразующие факторы со значительными транзакционными издержками подавляются институциональными и пространственно связанными факторами. Сформулирован закон пространственного неравенства возможностей и перспектив развития территорий. Закон приводит к когнитивному диссонансу (в методологии измерения экономического и природного капитала) и декаплингу (в практике взаимодействия центра и периферии). Чтобы начинать двигаться в сторону реального разрешения противоречия между экономикой и природой, необходимо пересмотреть в рамках новой рациональности подход, когда акцент ставится не на производственные структуры, а на воспроизводственные территориальные структуры социальных отношений (рассматриваемые в ключе геосистемы в контексте понимания коэволюции социальных систем и экосистем). В исследовании подчеркивается необходимость учета институциональной матрицы, баланса экстрактивных и инклюзивных институтов и других пространственно связанных факторов в рамках модели взаимодействия центр - периферия. The report shows that natural rent-generating factors with significant transaction costs are suppressed by institutional and spatially related factors. The law of spatial inequality of opportunities and prospects for the development of territories is formulated. The law leads to cognitive dissonance (in the methodology of measuring economic and natural capital) and decupling (in the practice of interaction between the center and the periphery). In order to start moving towards a real resolution of the contradiction between economy and nature, it is necessary to revise the approach within the framework of a new rationality, when the focus is not on production structures, but on the reproductive territorial structures of social relations (considered in the key of geosystems in the context of understanding the co-evolution of social systems and ecosystems). The study emphasizes the need to take into account the institutional matrix, the balance of extractive and inclusive institutions and other spatially related factors within the framework of the center-periphery interaction model.
    Keywords: экономическая рента; экономическое пространство; социальная геосистема; экосистема; экосистемный сервис; институт; центр-периферийные взаимодействия
    JEL: Q27 Q28 R13
    Date: 2021
  14. By: Shobande, Olatunji; Asongu, Simplice
    Abstract: Purpose – This paper provides an analysis of the energy-carbon Kuznets curve hypothesis (CKC) using a second-generation panel methodology. Design/methodology/approach – Specifically, we investigate whether energy consumption, natural resources, and governance explain the CKC proposition. Our empirical strategy is based on the Westerlund panel cointegration test, augmented mean group (AMG), and vector autoregressive (VAR) panel Granger-causality tests. Findings – The results suggest that the CKC hypothesis is incomplete without these mechanisms, as they play a critical role in reducing carbon emissions in Africa. We recommend improving the environmental standards and proper regulatory and monitoring systems to reduce carbon emissions and promote sustainable development in the continent. Originality/value –The study revisits the CKC hypothesis with particular emphasis on governance and more robust empirical estimation techniques.
    Keywords: carbon cuts; Energy consumption; Governance; Climate crisis; Panel analysis; Africa
    JEL: O1 Q20 Q30 Q50
    Date: 2021–01
  15. By: Julius, Daniel J.
    Abstract: This paper examines social justice and collective bargaining with a focus on higher education. Observations are offered around the following issues: a) a brief history of social justice as it has been conceptualized in labor management relations with a particular focus on unions in higher education; b) identification of collective bargaining scenarios when social justice platforms may have a more salient impact on negotiations; c) actions and strategies the parties might consider to accommodate social justice concerns in the bargaining process; and d) measuring and assessing collective bargaining outcomes. Collective bargaining in post-secondary institutions remains a complex phenomenon where political and legal guidelines are evolving particularly in a post-COVID environment. Accurate assessment of bargaining outcomes presents a variety of methodological challenges.
    Keywords: Education, Social and Behavioral Sciences, collective bargaining, academic unions, social justice, higher education labor negotiations
    Date: 2021–12–07
  16. By: Francesco Vona (French Economic Observatory)
    Abstract: This paper reviews the literature on the distributional effects of environmental and climate policies, focusing on ex-post empirical evidence. It decomposes the distributional effects into the main dimensions to understand which policy packages are more likely to achieve a triple dividend of environmental effectiveness, economic efficiency and equity. This paper also takes stock of the related literature on the political acceptability of environmental policies to assess proposals of compensation policy packages, including green recovery plans, environmental tax reforms and progressive subsidies to green technologies.
    Keywords: distributional analysis, environmental policy, inequality
    JEL: D30 H22 H23 Q52
    Date: 2021–12–15
  17. By: Simon Bruhn (Ilmenau University of Technology, Ilmenau, Germany); Thomas Grebel (Ilmenau University of Technology, Ilmenau, Germany); Lionel Nesta (Université Côte d'Azur, France; GREDEG CNRS; OFCE, SciencesPo; SKEMA Business School)
    Abstract: This paper argues that the typical practice of performing growth decompositions based on log-transformed productivity values induces fallacious conclusions: using logs may lead to an inaccurate aggregate growth rate, an inaccurate description of the microsources of aggregate growth, or both. We identify the mathematical sources of this log-induced fallacy in decomposition and analytically demonstrate the questionable reliability of log results. Using firm-level data from the French manufacturing sector during the 2009-2018 period, we empirically show that the magnitude of the log-induced distortions is substantial. Depending on the definition of accurate log measures, we find that around 60-80% of four-digit industry results are prone to mismeasurement. We further find significant correlations of this mismeasurement with commonly deployed industry characteristics, indicating, among other things, that less competitive industries are more prone to log distortions. Evidently, these correlations also affect the validity of studies that investigate the role of industry characteristics in productivity growth.
    Keywords: productivity decomposition, growth, log approximation, geometric mean, arithmetic mean
    JEL: C18 L22 L25 O47
    Date: 2021–12
  18. By: Joseph S. Shapiro
    Abstract: This article proposes and evaluates four hypotheses about US pollution and environmental policy over the last half century. First, air and water pollution have declined substantially, although greenhouse gas emissions have not. Second, environmental policy explains a large share of these trends. Third, much of the regulation of air and drinking water pollution has benefits that exceed costs, although the evidence for surface water pollution regulation is less clear. Fourth, while the distribution of pollution across social groups is unequal, market-based environmental policies and command-and-control policies do not appear to produce systematically different distributions of environmental outcomes. I also discuss recent innovations in methods and data that can be used to evaluate pollution trends and policies, including the increased use of environmental administrative data, statistical cost-benefit comparisons, analysis of previously understudied policies, more sophisticated analyses of pollution transport, micro-macro frameworks, and a focus on the distribution of environmental outcomes.
    JEL: H23 Q50 Q52 R11
    Date: 2021–11
  19. By: Nicolo Barbieri (Department of Economics and Management, University of Ferrara, Ferrara, Italy); Alberto Marzucchi (Gran Sasso Science Institute, Social Sciences, L’Aquila, Italy); Ugo Rizzo (Department of Mathematics and Computer Science, University of Ferrara, Ferrara, Italy)
    Abstract: The present study explores the technological complementarities between green and non green inventions. First, we look at whether inventive activities in climate-friendly domains de pend on patenting in related technological domains that are not green. Based on patent data filed over the 1978–2014 period, we estimate a spatial autoregressive model using co-occurrence matrices to capture technological interdependencies. Our first finding highlights that the develop ment of green technologies strongly relies on advances in other green and in particular non-green technological domains, whose relevance for the green economy is usually neglected. Building on this insight, we detect the non-green complementary technologies that co-occur with green ones and assess whether environmental policies affect this particular instantiation of technologies at the country level. The results of the instrumental variable approach confirm that while envi ronmental policies spur green patenting, they do not displace the development of the non-green technological pillars upon which green inventions develop.
    Keywords: Green technology, patent data, environmental policy, network-dependent innovation
    Date: 2021–11

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