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on Heterodox Microeconomics |
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Issue of 2022‒02‒07
eleven papers chosen by Carlo D’Ippoliti Università degli Studi di Roma “La Sapienza” |
| By: | Claudius Graebner-Radkowitsch (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; ZOE Institute for future-fit Economies, Bonn, Germany; International lnstitute of Management and Economic Education, Europa-Universitaet Flennsburg, Germany); Anna Hornykewycz (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Bernhard Schuetz (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria) |
| Abstract: | We use an agent-based stock-flow consistent model of a closed economy without technological change that considers different classes of households, status consumption and a Minskyan banking sector to analyze the relationship between rising saving rates, the accumulation and distribution of private financial wealth and the evolution of public debt. Conducting a series of experiments, we find evidence for Keynes’ famous claim that a rise in the propensity to save will not necessarily be matched by a rise in the propensity to invest, culminating in either chronic government deficits or consistently high unemployment rates if the government refuses to accept those deficits. The result emerges endogenously from the interaction of fully decentralized agents. The model indicates that promoting consumer credit can at best provide a very short-lived relief to this problem. |
| Keywords: | propensity to save; wealth accumulation; public debt; unequal distribution of income and wealth; consumer credit; household bankruptcy; agent-based stock-flow consistent modeling |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:ico:wpaper:135&r= |
| By: | Colozza, Federico (University of Roma Tre); Boschma, Ron (Department of Human Geography and Planning, Utrecht University, and UiS Business School, University of Stavanger); Morrison, Andrea (Department of Political and Social Sciences, University of Pavia, Department of Human Geography and Planning, Utrecht University, and ICRIOS, Bocconi University); Pietrobelli, Carlo (UNU-MERIT, Maastricht University, and University of Roma Tre) |
| Abstract: | This paper combines various literatures on Global Value Chains (GVC), Economic Complexity and Evolutionary Economic Geography. The objective is to assess the role of regional capabilities and GVC participation in fostering economic complexity in 236 NUTS2-regions in Europe. Our results suggest there is no such thing as a common path of economic upgrading across EU regions. Regions with high economic complexity tend to keep their advantageous positions, as they are capable of benefitting from both regional capabilities (as proxied by a high relatedness between local activities) and external linkages in terms of GVC participation. Conversely, low-complex regions do not benefit from GVC participation, unless their regional capabilities (in terms of relatedness density) are also stronger. |
| Keywords: | Economic Complexity, Evolutionary Economic Geography, Global Value Chains, Relatedness, Economic Upgrading, EU regions |
| JEL: | B52 F23 O19 O33 R10 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2021051&r= |
| By: | Farmer, J. Doyne; Dyer, Joel; Cannon, Patrick; Schmon, Sebastian |
| Abstract: | Simulation models, in particular agent-based models, are gaining popularity in economics. The considerable flexibility they offer, as well as their capacity to reproduce a variety of empirically observed behaviors of complex systems, give them broad appeal, and the increasing availability of cheap computing power has made their use feasible. Yet a widespread adoption in real-world modelling and decision-making scenarios has been hindered by the difficulty of performing parameter estimation for such models. In general, simulation models lack a tractable likelihood function, which precludes a straightforward application of standard statistical inference techniques. A number of recent works (Grazzini et al., 2017; Platt, 2020, 2021) have sought to address this problem through the application of likelihood-free inference techniques, in which parameter estimates are determined by performing some form of comparison between the observed data and simulation output. However, these approaches are (a) founded on restrictive assumptions, and/or (b) typically require many hundreds of thousands of simulations. These qualities make them unsuitable for large-scale simulations in economics and can cast doubt on the validity of these inference methods in such scenarios. In this paper, we investigate the efficacy of two classes of simulation-efficient black-box approximate Bayesian inference methods that have recently drawn significant attention within the probabilistic machine learning community: neural posterior estimation and neural density ratio estimation. We present a number of benchmarking experiments in which we demonstrate that neural network based black-box methods provide state of the art parameter inference for economic simulation models, and crucially are compatible with generic multivariate time-series data. In addition, we suggest appropriate assessment criteria for use in future benchmarking of approximate Bayesian inference procedures for economic simulation models. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:amz:wpaper:2022-05&r= |
| By: | Julia M. Puaschunder (The New School, Department of Economics, Eugene Lang College, New York, NY 10003, USA) |
| Abstract: | The climate change crisis has gained unprecedented urgency in the most recent decade. Overall, climate change has already led to and will continuously lead to environmental tipping points and irreversible lock-ins that will decrease the overall productivity and common welfare. When taking a closer look at the macroeconomic growth prospects as measured in Gross Domestic Product (GDP) per country, a changing climate will affect countries differently, when considering different mean temperatures but also differences in the GDP sector composition per country and a differing peak temperature at which a GDP sector can be most productive. In the first economic ‘classic’ theories of Adam Smith, Thomas Robert Malthus, David Ricardo, Karl Marx and Joseph Schumpeter land productivity was considered as an underlying growth driver. In the evolution of Modern Growth Theory (MGT), these theories and insights got abandoned. With climate change pressuring economic productivity and the rising impact of global warming expected to determine economic output more and more so in the future, this paper calls for a reintegration of climate and temperature into standard growth theory. In light of the enormous effect of temperature and climate on economic productivity that is likely to rise in the years to come but also with reference to the highly unequally distributed economic winning and losing prospects in-between countries and over time, this article argues for an integration of temperature and climate in contemporary Growth Theory, called Climate Growth Theory. Micro- and macroeconomic attempts to integrate productivity differences between countries based on energy supply, climate and overall favorable working conditions will be presented alongside most recent models to integrate temperature and climate into macroeconomic growth models and sustainable consumption patterns. |
| Keywords: | Climate Change, Economics of the Environment, Endogenous Growth Theory, Energy, Environmental Governance, Environmental Justice, Exogenous Growth Theory, Green New Deal, Intergenerational Equity, Monetary Policy, Multiplier, Non-renewable energy, Renewable energy, Sustainability |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:smo:lpaper:0084&r= |
| By: | Jose Luis Oreiro; Kalinka Martins da Silva |
| Abstract: | The Brazilian New Developmentalist School, also known as "consensus of São Paulo", can be understood as an approach to the deep determinants of economic development in which macroeconomic policy regime has a key role in explaining the long-term growth differentials among countries, notably middle-income countries. The school was originated from the seminal works of Bresser-Pereira (2006, 2007 and 2009) who defined new developmentalism as a set of proposals for institutional reforms and economic policies, whereby the middle-income countries seek to achieve the per-capita income level of developed countries. The first aim of this article is to present the theoretical foundations and the recent developments of the New Developmentalism School. Regarding the theoretical foundations, New Developmentalism is based on the so-called Structuralist Development Macroeconomics, which can be understood as a synthesis between Classical Development Theory, Latin American Structuralism and Post-Keynesian demand-led growth models. One of the most known and controversial features of new developmentalism is the key role of the manufacturing industry and real exchange rate in the process of economic development. The present article presents the state-of-the art reasoning of the New-Developmentalist school about why and how real exchange rate and manufacturing industry matters for long-run growth. Finally, the article discusses the convergences and divergences between New-Developmentalism and Balance of Payments Constrained Growth models, which are up today the major heterodox explanation for uneven development. |
| Keywords: | New-Developmentalism, Structuralist Development Macroeconomics, Real Exchange Rate |
| JEL: | O11 O14 O40 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2204&r= |
| By: | João P. Romero (Cedeplar/UFMG); Fabrício Silveira (Cedeplar/UFMG); Elton Freitas (Cedeplar/UFMG) |
| Abstract: | The paper seeks to combine mission-oriented and complexity-based smart specialization policies to devise diversification strategies focused on health-related products for Brazil. The approach is largely empirical and applies the economic complexity methodology to assess the best routes for Brazil, a country facing severe economic constraints but with a considerable level of productive capabilities already established in the healthcare sector. The mission-oriented development strategy outlined in this paper seeks enhance Brazil’s productive specialization while addressing also socioeconomic and environmental challenges. |
| Keywords: | Economic Development; Economic Complexity; Mission-Oriented; Diversification. |
| JEL: | O14 O25 O32 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td639&r= |
| By: | Alberto Botta; Giuliano Toshiro Yajima; Gabriel Porcile |
| Abstract: | The outbreak of COVID-19 brought back to the forefront the crucial importance of structural change and productive development for economic resilience to economic shocks. Several recent contributions have already stressed the perverse relationship that may exist between productive backwardness and the intensity of the COVID-19 socioeconomic crisis. In this paper, we analyze the factors that may have hindered productive development for over four decades before the pandemic. We investigate the role of (non-FDI) net capital inflows as a potential source of premature deindustrialization. We consider a sample of 36 developed and developing countries from 1980 to 2017, with major emphasis on the case of emerging and developing economies (EDE) in the context of increasing financial integration. We show that periods of abundant capital inflows may have caused the significant contraction of manufacturing share to employment and GDP, as well as the decrease of the economic complexity index. We also show that phenomena of "perverse" structural change are significantly more relevant in EDE countries than advanced ones. Based on such evidence, we conclude with some policy suggestions highlighting capital controls and external macroprudential measures taming international capital mobility as useful tools for promoting long-run productive development on top of strengthening (short-term) financial and macroeconomic stability. |
| Keywords: | COVID-19; Structural Change; Capital Inflows; Macroprudential Policies |
| JEL: | O14 O30 F32 F38 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_999&r= |
| By: | Michel Alexandre; Gilberto Tadeu Lima, Luca Riccetti, Alberto Russo |
| Abstract: | The purpose of this paper is to contribute to a further understanding of the impact of monetary policy shocks on a financial network, which we dub the “financial network channel of monetary policy transmission†. To this aim, we develop an agent-based model (ABM) in which banks extend loans to firms. The bank-firm credit network is endogenously time-varying as determined by plausible behavioral assumptions, with both firms and banks being always willing to close a credit deal with the network partner perceived to be less risky. We then assess through simulations how exogenous shocks to the policy interest rate affect some key topological measures of the bank-firm credit network (density, assortativity, size of largest component, and degree distribution). Our simulations show that such topological features of the bank-firm credit network are significantly affected by shocks to the policy interest rate, and this impact varies quantitatively and qualitatively with the sign, magnitude, and duration of the shocks. |
| Keywords: | Financial network; monetary policy shocks; agent-based modeling. |
| JEL: | C63 E51 E52 G21 |
| Date: | 2022–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2022wpecon1&r= |
| By: | Julia M. Puaschunder (The New School, Department of Economics, Eugene Lang College, New York, NY 10003, USA) |
| Abstract: | The external shock of the novel Coronavirus SARS-CoV-2 has profound impacts around the world for this generation and the following. Although accounting for the most drastic societal shift in modern history, the Coronavirus pandemic also holds the potential of a Great Reset. This paper addresses three trends that have become prevalent in the wake of the Coronavirus pandemic: (1) A rising inequality experienced has led to demands for Corporate Social Justice, namely the corporate engagement in social justice initiatives and action. (2) The finance world has had opportunities to diversify and exchange COVID-struck industries for COVID-profiting market segments and therefore a rising financial market performance versus real economy budget constraint gap has arisen. (3) Governments around the world are pegging economic COVID-19 rescue and recovery aid to pursue noble goals – such as climate change abatement and a transitioning to renewable energy in the United States Green New Deal and the European Green Deal and the European Sustainable Finance Taxonomy. These trends point at the integration of environmental, social and corporate governance in the corporate sector. The aftermath of the crisis is now a time for a great system reset to integrate environmental, social and corporate governance in the corporate and finance sectors. Future economic policy research may be inspired by legal expertise on disparate impact. With respect for current trends of citizen scientists and science diplomacy, public policy work may embrace environmental, social and corporate governance whole-roundedly. While natural behavioral laws were guiding anchors to address inequality during a turbulent time of the pandemic, more rational behavioral insights could nudge people into more equitable growth strategies in a recovering world. |
| Keywords: | Change management, Corporate Social Justice, Coronavirus, Corporate sector, COVID-19, Disparate impact, Environmental, European Green Deal, Social and Corporate Governance (ESG), Equitable Growth, Equality, Equity, Finance, Great reset, Green New Deal, Law and economics, Pandemic, Public policy, Recovery |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:smo:lpaper:0099&r= |
| By: | Julia M. Puaschunder (The New School, Department of Economics, School of Public Engagement, USA) |
| Abstract: | The fields of law and economics are hallmarks of social sciences. Legal studies account for the oldest foundations of scholarly work and have ever since been part of academic institutions. Since the inception of the science of economics, this standardized way of measuring utility had rising popularity. Surprisingly, the interdisciplinary discourse of Law and Economics has just recently started in the previous decades. In today’s world, the time has come to acknowledge the power of integrating Law and Economics as a most important approach to solve the most pressing issues of our contemporary times. Climate change, inequality and the introduction of Artificial Intelligence (AI) into our society will require the bundled strength of Law and Economics to successfully understand, harness the positive advancement but also curb harmful consequences of the opportunities and threats of our contemporary society. Law offers a humane-ethical clarity, governmental impetus and practical feasibility but also historical adaptability to implement societal changes including a legal birds-eye view of comparative approaches around the world, an exemplary sensitivity to disparate impacts of external influences on society but also clear guidelines how far the individual freedom can be granted in light of common security protection and societal welfare enhancement. Economics features the most advanced discounting of future value methods, an exemplary formalization of societal welfare maximization over time but also the most sophisticated ways to quantify societal losses over time and in often-overlooked or behaviorally-unforeseen externalities. Only in the harmonious combination of both disciplines will the most pressing contemporary predicaments of our time be solved and widespread inequalities be alleviated through fine-tuned redistribution mechanisms. Acknowledging the power of an interdisciplinary approach and cherishing a unique field of Law and Economics can help bridge the gap between societal entities. Adopting an interdisciplinary study approach with a commonly-understood language will promote a mutual understanding of multi-faceted insights in order to harvest the benefits of a fruitful Law and Economics Gestalt that is greater than its law and economics components. |
| Keywords: | AI, Artificial Intelligence, Climate Change, Coronavirus crisis, COVID-19, Disparate impact, Economics, Economics of the Environment, Environmental Justice, Environmental Governance, Equality, Family, Female Empowerment, Gender, Household, Law, Law and Economics, Mathematical formalization, Monetary policy, Multiplier, Nuclear family, Redistribution, Social Justice, Sustainability, Zero Waste movement |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:smo:lpaper:0117&r= |
| By: | Aragie, Emerta; Diao, Xinshen; Robinson, Sherman; Rosenbach, Gracie; Spielman, David J.; Thurlow, James |
| Abstract: | Rwanda’s policy response to COVID-19 has been widely praised for its rapid, systematic, and comprehensive approach to containing the pandemic. Although the economic consequences of the actions taken are unavoidable, the country expects to return its economy to its high-growth trajectory as the pandemic subsides. We used economic modeling tools designed to estimate the short-term economywide impacts of the unanticipated, rapid-onset economic shocks of COVID-19 on Rwanda. In this brief, we present a synopsis of the results of this analysis. • During the six-week lockdown that began in March 2020, we estimate Rwanda’s GDP fell 39.1 percent (RWF 435 billion; USD 484 million) when compared to a no-COVID situation. • Rwanda’s GDP in 2020 will be between 12 and 16 percent lower than a predicted no-COVID GDP, depending on the pace of economic recovery. The losses in annual GDP are between RWF 1.0 and 1.5 trillion (USD 1.1 to 1.6 billion). • While GDP for the industrial and services sectors were estimated to have fallen during the lockdown period by 57 and 48 percent, respectively, exemptions of COVID-19 restrictions for the agricultural sector limited the decline in agricultural GDP to 7 percent compared to a no-COVID situation. • During the lockdown period, the national poverty rate is estimated to have increased by 10.9 percentage points as 1.3 million people, mostly in rural areas, fell into temporary poverty. Poverty rates are expected to stabilize by the end of 2020, increasing only by between 0.4 and 1.1 percentage points over the pre-COVID situation. While these figures are encouraging, they mask the impacts on poor households of the sharp poverty spike during the lockdown and the inherent complexity of poverty dynamics post-lockdown. Looking forward, the speed and success of Rwanda’s economic recovery will depend critically on expanding Rwanda’s social protection programs, supporting enterprises of all sizes, providing broad assistance to the agri-food system, and restoring international trade. |
| Keywords: | RWANDA, CENTRAL AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, Coronavirus, coronavirus disease, Coronavirinae, COVID-19, economic impact, agrifood systems, poverty, policies, modelling, lockdown, Social Accounting Matrix (SAM), |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:rssppn:1&r= |