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on Heterodox Microeconomics |
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Issue of 2022‒11‒07
nineteen papers chosen by Carlo D’Ippoliti Università degli Studi di Roma “La Sapienza” |
| By: | Mark Setterfield; YK Kim |
| Abstract: | We extend the principles of the Financial Instability Hypothesis (FIH) to the household sector by re-framing the three financial postures associated with the FIH (hedge, speculative, and Ponzi) in the context of households, using a simple model of household borrowing and debt-financing behavior. We also connect our analysis to various strands of research in Comparative Political Economy on credit regimes, the welfare state, and Varieties of Capitalism. Our paper thereby discusses the importance of welfare systems and financial regimes as determinants of household borrowing behavior and hence the financial fragility of the household sector. In so doing it relates to recent US policy debates by demonstrating the macroeconomic consequences of raising taxes on top incomes in order to fund an increase in the social wage. Our results suggest that taxing top incomes to provide social services without accumulating public debt improves macroeconomic resilience and may also improve macroeconomic performance. We therefore uncover some of the values of welfarism that the neoliberal ‘experiment’ inadvertently revealed by ‘rolling back the frontiers of the welfare state’ and in so doing, leading capitalism headlong into the 2007-09 financial crisis. |
| Keywords: | Financial fragility, financial instability hypothesis, household borrowing, household debt, welfare state, macroeconomic resilience |
| JEL: | E12 E44 O41 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:mab:wpaper:2022-02&r= |
| By: | Nomaler, Önder (RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn); Verspagen, Bart (RS: GSBE MGSoG, RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn, RS: UNU-MERIT Theme 1) |
| Abstract: | In this paper, we provide a brief overview of the field of complexity research in economics, and discuss directions of research that we consider to be promising in terms of solving open issues. We start the survey of the field with the research that emerged in the 1990s, when under the influence of earlier developments in the natural sciences (e.g., thermodynamics and chaos theory), the term complexity became in fashion to refer to theoretical ideas about how "ordered" patterns at an aggregate level can emerge from interaction between heterogenous agents at the microeconomic level. This gave rise to the notion of self-organization in dissipative systems, or "order at the edge of chaos" to describe economic dynamics. Because disequilibrium plays a large role in these theories, these ideas worked very well in combination with a Schumpeterian view of the economy, which also stresses disequilibrium. In the current literature, economic complexity is mainly used to refer to the application of quantitative methods based on networks that can be created on the basis of very fine-grained data on production or trade. These data are used to produce aggregate measures of development, as well as to describe how production structures may evolve over time. This literature developed largely disconnected to the earlier complexity literature. The new economic complexity paradigm is largely void of economic theory, and instead aims to provide a set of data reduction techniques that are used to characterize development. With regard to outlook for complexity research in (Schumpeterian) economics, on the one hand, we feel that the potential for analyzing the economy as a dissipative, out-of-equilibrium system has not been fully exploited yet. In particular, we propose that - in line with the field of "Big History" (which aims to describe and analyze a coarse history of the universe since the Big Bang) - there is work to be done on the larger issues in economics, in particular climate change and sustainability. |
| JEL: | B52 O30 O31 O33 |
| Date: | 2022–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2022023&r= |
| By: | Mughal, Adil Ahmad |
| Abstract: | Aside from the calculating and always troublesome utilitarian ethic, a moral theory of value can better serve as a desirable form of the veil of ignorance analogy on the part of the arbitration of allocation procedures. Philosopher Soren Kierkegaard suggested a 'moral absolute' that achieves a 'teleological suspension of the ethical'. This suspension or the veil of ignorance can be formulated as a randomization of allocation procedures across agents in a given preference space; such that, a truly self-interested gain is unpriced and therefore a true gift, that is, a gift without an obligation. |
| Keywords: | Moral value, self-interest, the gift, invariance of domain, social preferences, unpriced preferences |
| JEL: | B4 C0 C70 C78 C9 D6 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:114825&r= |
| By: | John Komlos |
| Abstract: | Maximizing output without taking into consideration the negative externalities generated, including the harm to the mental and physical health of the population creates psychological stress. Focusing on the bellwether indicators of economic performance including working more, generating income, accepting more risks, while disregarding its effect on work-life balance, on income distribution, and the quality of life in general creates stressors that harm the human biological system. Stress is the biological reaction to external stimuli that threatens the self-preservation instinct of a human organism. The stress was generated by debilitating poverty, financial insecurity, by the highest level of inequality among rich countries that led to the hollowing out of the middle class, by the lack of social safety nets that might have mitigated the turbulence of adjusting to a knowledge economy, by the downward social mobility of millions disadvantaged by globalization, and by the inadequate retraining opportunities that prevented those displaced by the penetration of imports to find employment in the expanding IT sector. These stressors have been accumulating in the U.S. population for decades, as indicated by the deterioration of mental health, by the propensity to relieve the pain through the use of illicit drugs, by deaths of despair, by the incarceration rate, by mass murders, by the fall in life expectancy, by the attenuation in life satisfaction, and by the rise of populism, creating many mental, biological, social, economic, and political quandaries. |
| Keywords: | capitalism, psychological stress, globalization, financial crisis, inequality, populism |
| JEL: | A14 D60 D91 E71 G41 P16 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9966&r= |
| By: | M. Nur A. Birton (Universitas Muhammadiyah Jakarta, Indonesia Author-2-Name: Mahfud Sholihin Author-2-Workplace-Name: Universitas Gadjah Mada, Yogyakarta, Indonesia Author-3-Name: Muhammad Muttaqin Author-3-Workplace-Name: Universitas Muhammadiyah Jakarta, Jakarta, Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | "Objective - This article aims to (1) examine three concepts of practical ethics originating from fiqh muamalah studies, namely al kharaj bi al dhaman, maslaha, and nafaqa, as substitutes for the more philosophical basis of Baydoun and Willett's (2000) Islamic ethics; and (2), apply the three concepts to improve the structure and content of Baydoun and Willett's (2000) value-added statement. Methodology/Technique - Maslaha-based VAS can improve VAS weaknesses in Baydoun and Willett's (2000) ICRs and be an alternative to the 1993 and 2010 AAOFI income statements. Findings - The use of the kharaj bi al dhaman, maslaha, and nafaqa concepts could direct the content and structure of financial reports from the ""secular"" one into sharia and humanistic. Novelty - The application of the concept of kharaj bi al dhaman substitutes for the matching concept; the idea of nafaqa substitutes for expenses; and the notion of maslaha makes the maslaha-based VAS more powerful, philosophical, conceptual, and practical than the VAS of Baydoun and Willett and the AAOIFI income statement Type of Paper - Review" |
| Keywords: | Al kharaj bi al dhaman, Islamic corporate reports, maslaha, nafaqa, value-added statement. |
| JEL: | M41 M42 |
| Date: | 2022–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:afr217&r= |
| By: | Albert Kwame Osei-Owusu; Michael Danquah; Edgar Towa |
| Abstract: | This paper applies an environmentally extended input-output analysis, leveraging the Eora database, to estimate the global raw material footprints of 51 African nations from 1995 to 2015. It employs least absolute shrinkage and selection operator and panel regression models to quantify the effects of diverse variables on Africa's raw material footprints. The findings show that the raw material footprints of Africa's production and consumption soared by 41 per cent and 38 per cent, respectively, from 1995 to 2015, mainly driven by biomass and construction materials. |
| Keywords: | Ecological footprint, Input–output, Raw materials, Africa, environmental impact, Regression analysis |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2022-115&r= |
| By: | Hasanbasri,Ardina Roosiany,Kilic,Talip,Koolwal,Gayatri B.,Moylan,Heather G. |
| Abstract: | A better understanding of how individual wealth and time use are linked — across paid, unpaid, and leisure activities — is important for targeting widespread gender inequalities in time allocation, as well as in accessing economic opportunities. The lack of reliable, individual-level data on asset ownership across different subpopulations, however, has limited discussions of these issues in the literature. Using a unique nationally representative survey from Cambodia, this paper shows that individual wealth, as measured through self-reported ownership of physical and financial assets, is significantly associated with time allocation to different activities. The role of asset ownership in time use is also stronger, particularly among women, vis-à-vis the competing proxies for socioeconomic status. Ownership of financial accounts, motorized vehicles, and mobile phones — all of which can improve access to networks, markets, and services — is associated with less time in unpaid work, and in some cases greater time in paid work, specifically among women in off-farm jobs. There are also distinct gender differences in how men and women shift their time away from leisure and childcare, highlighting the importance of social norms in choices over time use. The analysis highlights the utility of integrated, intra-household, individual-disaggregated data collection on asset ownership, time use, and employment in lower-income contexts. |
| Keywords: | Gender and Development,Telecommunications Infrastructure,Wages, Compensation&Benefits,Food Security,Livestock and Animal Husbandry |
| Date: | 2021–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9765&r= |
| By: | Rubiano Matulevich,Eliana Carolina |
| Abstract: | Conflict-induced displacement is associated with loss of human and physical capital andpsychological trauma. Households and social structures that produce and reproduce gender norms are disrupted, providingopportunities for change. This paper operationalizes a definition of gender norms that brings together thebehaviors and attitudes of displaced and non-displaced women using household survey data for Colombia. The results of atwo-step estimation involving kernel-based propensity score matching and multilevel linear regression models show thatgender norms condoning violence against women relax with displacement, while those that limit women’s economicopportunities become more rigid. The findings also reveal a misalignment between attitudes and behaviors in otherdomains. Displaced women have less rigid patriarchal attitudes, but their ability to decide about contraceptionand their own earnings decreases following displacement. |
| Keywords: | Gender and Development,Health Care Services Industry,Social Conflict and Violence,Anthropology,Gender and Social Development |
| Date: | 2021–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9822&r= |
| By: | João Alcobia; Ricardo Barradas |
| Abstract: | In recent decades, the labour share has experienced a downward trend in Portugal that has occurred at the same time as a weaker and anaemic growth pattern. This seems to suggest that the fall in the labour share represents an important constraint on Portuguese economic growth, which does not support the orthodox claims around wage restraint policies as a necessary condition to improve macroeconomic performance due to their positive effects on private investment through higher profits and on net exports through lesser unit labour costs and a corresponding rise in competitiveness. This study assesses the relationship between labour share and economic growth by performing a time series econometric analysis focused on Portugal from 1970 to 2020. Findings show that labour share positively impacts economic growth in Portugal, which is in line with heterodox claims and particularly with post-Keynesian economics on the beneficial effects on private consumption played by the growth of wages. Findings also confirm that the Portuguese economy follows a wage-led growth regime instead of a profit-led growth regime; that is, a rise in wages boosts economic growth because its beneficial effect on private consumption more than compensates for a prejudicial effect on private investment and on net exports. The study points out the urgent need to adopt public policies to support the growth of wages to avoid more decades of dismal growth and a new ‘secular stagnation’ in Portugal. |
| Keywords: | Post-Keynesian Economics; Labour Share; Economic Growth; Portugal; Generalised Method of Moments Estimator |
| JEL: | C22 D33 E12 O47 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp02472022&r= |
| By: | Dafermos, Yannis; van Lerven, Frank; Nikolaidi, Maria |
| Abstract: | Capital requirements play a central role in financial regulation and have significant implications for financial stability and credit allocation. However, in their existing form, they fail to capture environment-related financial risks and act as a barrier to the transition to an environmentally sustainable economy. This paper considers how capital requirements can become green and explores how green differentiated capital requirements (GDCRs) can be incorporated into financial regulation frameworks. |
| JEL: | F3 G3 |
| Date: | 2022–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:116946&r= |
| By: | GOTO Hiromitsu; SOUMA Wataru |
| Abstract: | Understanding the industrial structure of inner and inter prefectures is crucial for policymakers to make economic policies according to evidence. To address this issue, using the dataset of financial statements and connections for one million firms in Japan collected by Tokyo Shoko Research Inc., we construct a multiplex supply network with 47 layers equivalent to prefectures. Applying clustering analysis based on the Jensen-Shannon distance between networks and the community detection techniques known as the Infomap method to this multiplex supply network, we clarify industrial structural similarities and differences for each prefecture. Finally, we compare the results for multiplex supply networks and the well-known facts for each prefecture's Input-Output table to evaluate our result's validity and complementarity. Our findings of this study are as follows. First, from 2011 to 2018, the industrial networks of 47 prefectures can be classified into three structural patterns by a degree of urbanization. Second, the hierarchical community structure can be observed using firm-level data. However, this hierarchical community structure cannot be seen in the conventional Input-Output table dataset. Therefore, our findings suggest a new classification approach for prefectures based on similarities in the industrial structure and contribute to a better insight into the geographical characteristics of each region's industrial structure. |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:22092&r= |
| By: | Stennek, Johan (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Rayo and Becker (2007) model happiness as an imperfect measurement tool: It provides a partial ordering of alternative courses of actions. In this note, decisionmakers use their inability to rank two actions, to infer rankings of other pairs of actions. It is demonstrated that coarser happiness information actually increases the power of inference. As a result behavior is maximizing, not merely satisficing, almost independent of how coarse the happiness information is. Moreover, to support inference, evolution selects a happiness function with different properties than the one maximizing direct sensory information. |
| Keywords: | Indirect evolutionary approach; utility function |
| JEL: | B52 D91 I31 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0829&r= |
| By: | Rao,Vijayendra |
| Abstract: | This paper argues that Economics can learn from Cultural Anthropology and Qualitative Sociologyby drawing on a judicious mix of qualitative and quantitative methods to become more “reflexive.” It arguesthat reflexivity, which helps reduce the distance between researchers and the subjects of their research, has four keyelements: cognitive empathy, the analysis of narratives (potentially enhanced by machine learning), understandingprocess, and participation (involving respondents in research). The paper provides an impressionistic andnon-comprehensive review of mixed-methods relevant to development economics and discrimination to illustrate these points. |
| Keywords: | Human Rights,Gender and Development,Financial Sector Policy,Social Cohesion,ICT Applications |
| Date: | 2022–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9918&r= |
| By: | Taheripour,Farzad; Chepeliev,Maksym; Damania,Richard; Farole,Thomas; Lozano Gracia,Nancy; Russ,Jason Daniel |
| Abstract: | Can countries reorient their productive capacity to become more environmentally friendly and inclusive? To investigate this question, this paper uses a standard input-output modeling framework and data from 141 countries and regions to construct a new global data set of employment, value-added, greenhouse gas emissions (disaggregated into carbon dioxide and non-carbon dioxide elements), and air pollution (including nine categories of air pollutants such as fine particulate matter multipliers from supply-side investments. The analysis finds that many of the traditional sectors in agriculture and industry have large employment multipliers, but also generate male dominant, lower skill employment, and tend to have higher emissions multipliers. It is in economies dominated by these sectors that trade-offs to a “greener” transition will emerge most sharply. However, the analysis finds substantial heterogeneity in outcomes, so even in these economies, there exist other sectors with high employment multipliers and low emissions, including sectors that are more conducive to female employment. In addition, the analysis finds a high correlation between industries that generate greenhouse gas emissions, which cause long-term climate impacts, and those that generate air pollution, which have immediate harmful impacts on human health, suggesting that policies could be designed to confer longer climate benefits simultaneously with immediate health improvements. The results confirm some of the findings from recent research and shed new light on opportunities for greening economies. |
| Keywords: | Transport Services,International Trade and Trade Rules,Health Care Services Industry,Energy and Environment,Energy Demand,Energy and Mining,Livestock and Animal Husbandry |
| Date: | 2021–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9742&r= |
| By: | Leonhard Lades; Federica Nova (Environmental Policy, University College Dublin, Ireland and UCD Geary Institute for Public Policy) |
| Abstract: | Behaviourally informed interventions such as nudges are increasingly used to encourage sustainable and often meat-free diets. These interventions are motivated by concerns about peoples health, animal welfare, and the environmental degradation linked to meat consumption. However, dietary choices are very personal and often of cultural importance, and behavioural interventions have been criticized, for example, for being paternalistic, manipulative, and not respecting people's autonomy. Applying the FORGOOD ethics framework, this paper organises diverse ethical arguments in favour and against using behavioural interventions to reduce meat consumption. We present a systematic high-level discussion on the ethics of influencing peoples diets and suggest that choice architects should reflect on ethical implications when designing, and before implementing, behavioural interventions to reduce meat consumption. |
| Keywords: | Meat Consumption; Sustainable Diets; Nudge; Libertarian Paternalism; Ethics; FORGOOD |
| JEL: | F18 H23 P48 Q00 Q56 |
| Date: | 2022–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:202209&r= |
| By: | Olivier Chanel (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Alberto Prati (The University of Mississippi [Oxford], LSE - London School of Economics and Political Science); Morgan Raux (University of Luxembourg [Luxembourg]) |
| Abstract: | We provide an estimate of the environmental impact of the recruitment system in the economics profession, known as the "international job market for economists". Each year, most graduating PhDs seeking jobs in academia, government, or companies participate in this job market. The market follows a standardized process, where candidates are pre-screened in a short interview which takes place at an annual meeting in Europe or in the United States. Most interviews are arranged via a non-profit online platform, econjobmarket.org, which kindly agreed to share its anonymized data with us. Using this dataset, we estimate the individual environmental impact of 1057 candidates and one hundred recruitment committees who attended the EEA and AEA meetings in December 2019 and January 2020. We calculate that this pre-screening system generated the equivalent of about 4800 tons of avoidable CO2-eq and a comprehensive economic cost over €4.4 million. We contrast this overall assessment against three counterfactual scenarios: an alternative in-person system, a hybrid system (where videoconference is used for some candidates) and a fully online system (as it happened in 2020–21 due to the COVID-19 pandemic). Overall, the study can offer useful information to shape future recruitment standards in a more sustainable way. |
| Keywords: | Job market for economists,International job market,Carbon footprint,Environmental impact,Comprehensive economic cost |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03778777&r= |
| By: | Masaaki Fujii |
| Abstract: | In this work, we develop an equilibrium model for price formation of securities in a market composed of two populations of different types: the first one consists of cooperative agents, while the other one consists of non-cooperative agents. The trading of every cooperative member is assumed to be coordinated by a central planner. In the large population limit, the problem for the central planner is shown to be a conditional extended mean-field control. In addition to the convexity assumptions, if the relative size of the cooperative population is small enough, then we are able to show the existence of a unique equilibrium for both the finite-agent and the mean-field models. The strong convergence to the mean-field model is also proved under the same conditions. |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2209.12639&r= |
| By: | Shijun Gu; Chengcheng Jia |
| Abstract: | How does wealth inequality affect economic growth? Byoungchan Lee answers this question by developing a heterogeneous-agent model and augmenting it with endogenous firm innovation. The novel channel is that rising wealth concentration reduces aggregate demand, which gives firms a disincentive to spend on R&D and therefore leads to slower productivity growth. In this discussion, we first explain the difference in calibration strategy between Lee’s approach and the common approach in the literature, and then discuss its quantitative implications for the effect of rising inequality on aggregate consumption. |
| Keywords: | heterogeneous-agent model; wealth inequality; aggregate consumption; Diversity |
| JEL: | D31 D52 E21 |
| Date: | 2022–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:94912&r= |
| By: | Fruttero,Anna; Muller,Noel; Calvo-Gonzalez,Oscar |
| Abstract: | Aspirations have become a common theme in empirical economics studies, but there is no unified understanding of the range of outcomes they influence, the factors that shape them, and how to measure them. This paper surveys this growing literature. The paper argues that there is compelling evidence to consider aspirations as a useful lens to analyze human behavior and development outcomes, at the individual and aggregate levels, in poorer and richer countries. The empirical evidence aligns with the theory that high aspirations can lead individuals to achieve better educational, labor market, and other outcomes and can contribute to making countries more equal and prosperous. The empirical evidence also confirms that the mix of social and circumstantial factors shaping aspirations tends to hinder the aspirations of the disadvantaged—such as the poor, immigrants, and women—and can contribute to vicious circles of poverty, high inequality, low social mobility, and low growth. However, high aspirations should not be considered as an end in themselves as they can backfire, with deleterious effects, if unmatched with opportunities. Further, the paper argues that definitional and measurement issues can affect the understanding of the topic and that studies should more explicitly describe their measures of aspirations to ensure that divergent underlying concepts are not mistaken. |
| Keywords: | Educational Sciences,Inequality,Labor Markets,Economic Assistance,Access of Poor to Social Services,Services&Transfers to Poor,Disability,Poverty Assessment,Poverty Impact Evaluation,Poverty Lines,Poverty Monitoring&Analysis,Small Area Estimation Poverty Mapping,Poverty Diagnostics |
| Date: | 2021–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9729&r= |