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on Heterodox Microeconomics |
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Issue of 2024‒06‒17
twenty papers chosen by Carlo D’Ippoliti, Università degli Studi di Roma “La Sapienza” |
| By: | Mark Setterfield (Department of Economics, New School For Social Research, USA) |
| Abstract: | This paper provides a brief introduction to social structure of accumulation theory (SSAT), for a special issue of the New School Economic Review on SSAT. |
| Keywords: | Social structure of accumulation, institutions, long waves, conflict, uncertainty |
| JEL: | B51 B52 E11 E12 O43 P1 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2408&r= |
| By: | Simone Brusatin; Tommaso Padoan; Andrea Coletta; Domenico Delli Gatti; Aldo Glielmo |
| Abstract: | Agent-based models (ABMs) are simulation models used in economics to overcome some of the limitations of traditional frameworks based on general equilibrium assumptions. However, agents within an ABM follow predetermined, not fully rational, behavioural rules which can be cumbersome to design and difficult to justify. Here we leverage multi-agent reinforcement learning (RL) to expand the capabilities of ABMs with the introduction of fully rational agents that learn their policy by interacting with the environment and maximising a reward function. Specifically, we propose a 'Rational macro ABM' (R-MABM) framework by extending a paradigmatic macro ABM from the economic literature. We show that gradually substituting ABM firms in the model with RL agents, trained to maximise profits, allows for a thorough study of the impact of rationality on the economy. We find that RL agents spontaneously learn three distinct strategies for maximising profits, with the optimal strategy depending on the level of market competition and rationality. We also find that RL agents with independent policies, and without the ability to communicate with each other, spontaneously learn to segregate into different strategic groups, thus increasing market power and overall profits. Finally, we find that a higher degree of rationality in the economy always improves the macroeconomic environment as measured by total output, depending on the specific rational policy, this can come at the cost of higher instability. Our R-MABM framework is general, it allows for stable multi-agent learning, and represents a principled and robust direction to extend existing economic simulators. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.02161&r= |
| By: | Jiri Kukacka (Czech Academy of Sciences, Institute of Information Theory and Automation, Czechia & Charles University, Faculty of Social Sciences, Institute of Economic Studies); Erik Zila (Czech Academy of Sciences, Institute of Information Theory and Automation, Czechia & Charles University, Faculty of Social Sciences, Institute of Economic Studies) |
| Abstract: | Financial-macroeconomic agent-based models offer a promising avenue for understanding complex economic interactions, but their use is hindered by challenging empirical estimation. Our paper addresses this gap by constructing a stylized integrated model and estimating its core parameters using US data from 1954 to 2022. To tackle econometric obstacles, including mixed data frequencies, we adapt the simulated method of moments. We then focus on three key interaction channels. The stock market influences the real sector through the wealth effect, which boosts current consumption, and the cost effect, which lowers financing costs for firms. Conversely, the real economy impacts the stock market via the price misperception effect, where economic conditions help approximate the fundamental value of stocks. Our results provide strong statistical support for all three channels, offering novel empirical insights into critical dynamics between the two sectors of the economy. |
| Keywords: | integrated agent-based model, behavioral finance and macroeconomics, bounded rationality, heuristic switching, simulated method of moments |
| JEL: | C13 C53 E12 G41 E71 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2024_22&r= |
| By: | Thomas I. Palley |
| Abstract: | Keynes' General Theory was a massive step forward relative to classical economics, but it was also a step backward in its denial of the conflictual nature of capitalism. There is need to understand Keynes' technical contributions regarding the workings of monetary economies, but also need to understand the flaws within his thinking and the consequences thereof. Keynes made a fundamental contribution elucidating the mechanism of effective demand, and he also has claim to be the preeminent monetary theorist. However, owing to his denial of conflict, he had a flawed view of capitalism which is why establishment Keynesianism struggles to explain contemporary stagnation. That flawed view also undermines the case for Social Democracy. Contrary to conventional wisdom, his view of capitalism is supportive of Neoliberalism and Keynes can be viewed as a compassionate (Third Way) Neoliberal. |
| Keywords: | Hysteresis, institutions, policy lock-in, psychology, identity, ideas |
| JEL: | B40 E10 E12 E32 P50 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:92-2023&r= |
| By: | Jack Birner; Marco Mazzoli; Eleonora Priori; Pietro Terna |
| Abstract: | Traditional notions of production function do not consider the time dimension, appearing thus timeless and instantaneous. We propose an agent-based model accounting for the whole production side of the economy to unfold the production process from its very beginning, when firms receive production orders, to the delivery of the products to the market. In the model we analyze with a high-degree of details how heterogeneous firms, having labor and capital as productive factors, behave along all the realization processes of their outputs. The main focus covers: i) the heterogeneous duration of firms' production processes, ii) the adaptive strategies they implement to adjust their choices, and iii) the possible failures which may occur due to the duration of the production. Our agent-based model is a controlled experiment: we use a virtual central planner mechanism, which acts as the demand side of the economy, to observe which firm individual behaviors and aggregate macroeconomic outcomes emerge as a reply to its different behaviors in a ceteris paribus environment. Our applied goal, then, is to discuss the role of industrial policy by modeling production processes in detail. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.07103&r= |
| By: | M. Alejandra INOSTROZA (Pontificia Universidad Católica de Chile, Instituto Milenio para la Investigación del Cuidado, MICARE, Santiago, (Chile)); Paula Miranda SÃ NCHEZ (Pontificia Universidad Católica de Chile, Instituto Milenio para la Investigación del Cuidado, MICARE, Santiago, (Chile)) |
| Abstract: | The gender disparities seen in other economic and productive sectors often recur in cooperatives (Díaz, 2015). Given that cooperatives have a number of features that lean towards gender equality, this stands as a stark contradiction to cooperative theory and practice (Alid, 2016). Additionally, based on an awareness of people as a whole, the social market economy's guiding principles support the compatibility of caring obligations and productive activity (Ribas & Sajardo, 2011). The existence of both objective-material aspects and subjective variables is noted in relation to what would be the hurdles and facilitators of a larger complete, active, and long-term engagement of women in cooperatives (Hernández & Sánchez, 2018; Romero, 2012). Given the foregoing, this study aims to conduct a systematic review of the literature using 80 articles from the last 15 years, as well as comparative bibliometrics in other economies in Latin America, in order to identify any factors that may be preventing or facilitating women's participation in cooperative movements. As a result, we obtained three thematic clusters, Cluster 1: gender-mother-care-work; Cluster 2: education-school-policies-quality of life and Cluster 3: inequality, vulnerability, and economy. Regarding the bibliometric results, it is observed that the most influential authors and journals correspond to first world countries. This gives us a wonderful overview that affects public policies and the significance of considering this type of economy from a gender viewpoint in addition to the academic community. |
| Keywords: | Gender, Cooperatives, Participation, Latin America, Other economies |
| JEL: | J54 J70 J81 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2305&r= |
| By: | Matías Vernengo |
| Abstract: | Right-wing critics of Keynes have often suggested that he was a socialist. His policy proposals were very often described as a slippery slope that would lead society into a totalitarian nightmare. Alternatively, from the left, Keynes was often seen as a reformist that intended to preserve the essence of capitalism. His reforms were mere window dressing on an exploitative system. The scholarship on Keynes also remained divided. However, in the last few decades a more robust position in favor of Keynes' socialist affiliation was developed, particularly in the careful scholarship by Rod O'Donnell and James Crotty. This paper suggests that while Keynes was a pragmatist willing to experiment in economic policy, and fully aware of the need to transform and transcend laissez-faire capitalism, he remained a liberal, in particular because Labourites, and most socialists, remained conservative in their economic policy outlook. Keynes was a revolutionary in economic theory, but a moderate in his politics. |
| Keywords: | Neoclassical Economics, Socialism, Macroeconomics, Keynes |
| JEL: | B13 B14 B22 B31 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:94-2023&r= |
| By: | Nadine RICHEZ-BATTESTI (LEST CNRS, Aix-Marseille Université (AMU), (France)); Mariagrazia CAIRO-CROCCO (Centre Gilles Gaston Granger (CGGG) CNRS, Aix-Marseille Université (AMU), (France)) |
| Abstract: | The field of the social and solidarity economy (SSE), institutionalized in France by the law of 2014, has its roots in the 19th century in the tradition of the associationism movement, marked by autonomy and emancipation through work. The organizations and the meaning of the work associated with them seem to be driven by the values intrinsic to the collective project deployed, the practices associated with it and a vision of social transformation. From WISE to multi-stakeholder organizations and salaried entrepreneurs, new organizational models and forms of work are emerging as inspiring objects that hold out the promise of emancipation and alternatives. They constitute workplaces with a utopian aim (Desroches, 1991) - often in the context of social microexperiments (Paquot, 2020) - which reflect a specific relationship with the territory. From this perspective, how can we observe and analyze these new forms of work both from the point of view of the organizations that support it and the meaning of the work associated with it, both at the level of the organizations and the place of the acting subjects? And what role do forms of creativity that promote emancipation play in the organization of work? What are its spaces and the conditions for its emergence and perpetuation? Are its promises being translated into sustainable alternatives and at what cost? These questions take on their full meaning in a context where aspirations to transform society are being reaffirmed (Coutrot, Perez, 2022; Frère, Laville, 2022) in the face of the challenges of necessary transitions. We adopt a qualitative analyze built on 5 case studies in Marseille. |
| Keywords: | utopias, SSE, governance, work, emancipation, territory |
| JEL: | B55 L31 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2304&r= |
| By: | Hwalshin KIM (Sungkonghoe University, Seoul, (Republic of Korea)); Seungkwon JANG (Sungkonghoe University, Seoul, (Republic of Korea)) |
| Abstract: | This study analyzes how the characteristics of information systems appear in cooperatives and what organizational results they have. Advances in technology reveal that information systems are not just mechanical devices or technologies but are social material beings co-constructed with human actors such as developers and users (Law, 2009; Suchman, 2007). This social material perspective on information systems shows that information systems are continuously reconstructed through social material practices of human and non-human actors (Orlikowski, 2010; Orlikowski & Scott, 2015; Scott & Orlikowski, 2014). This paper defines the information system as an actor-network composed of human and non-human actors. It shows through the case of a cooperative in Korea that the social material practices of the actor-network reconstruct the information system. Through the conversion process of the information system, the cooperative information systems were reconstructed into different forms through different social material practices of its members. It formed a multiple information system actor-network. Furthermore, the members do not establish the cooperative's organizational management principle but mix it with the organizational management principle existing before the conversion, so the members perform different practices. Converting the cooperative information system shows that the information system has multiplicity, dynamic, contingent, and indetermination characteristics. When we consider these information system characteristics in the management field, we increase user participation and the effectiveness of information system introduction by being free from the rigidity of technology. |
| Keywords: | Information System, Cooperative, Actor-Network, Sociomaterial Practice, Korea |
| JEL: | M15 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2401&r= |
| By: | Karthikeyan MUTHUMARIAPPAN & Karthika PALANISAMY (Department of Cooperatives, College of Business & Economics, Wollo University, Dessie, Amhara Region, (Ethiopia)); Karthika PALANISAMY (Department of Management, College of Business & Economics, Kebredehar University, Kebredehar, Somali Region, (Ethiopia)) |
| Abstract: | Cooperatives are more relevant than ever if we look ahead at the development challenges and opportunities the world faces over the coming decades, and are being a key vehicle for sustainable livelihoods. This paper is an analytical review made by desk research of Cooperatives on the realization of sustainable development goals for enhancing livelihoods of people with multiple case studies approach. The cases highlight the contribution of cooperatives to sustainable development and showcase on the role of cooperatives in the design and implementation of the Sustainable Development Goals (SDGs). Cases prove that cooperatives help create more equitable growth by generating economics of scale, and improving bargaining power; tackle rural poverty by increasing the productivity and incomes of small scale farmers; expand poor people’s access to financial services, can provide a range of services such as health care, housing and utilities; provide an opportunity for self-determination and empowerment of poor people and enable their members to have a voice and participate in a democratic process, thus having empowering development effects beyond their economic benefits. Cooperatives can help with conflict resolution, peace-building, social inclusion and social cohesion because they bring together people they can build trust and solidarity leading to greater social stability. By considering the evidences on the contributions and achievements made by Cooperatives in all sectors of economy and in all aspects of the life of people, cooperatives can be considered as hybrid approach that makes it more acquiescent than other business models to pull off sustainable development and livelihoods of world community through contributions towards SDGs. |
| Keywords: | Cooperatives, Hybrid Approach, Livelihoods, Sustainable Development, SDGs |
| JEL: | Q01 P13 I31 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2307&r= |
| By: | Khadija ANGADE (Ibn Zohr University Agadir, (Morocco)) |
| Abstract: | The cooperative sector is currently an important lever for local, regional and national development. Due to their legal form and associated social and tax advantages, cooperatives actively contribute to reducing unemployment and improving living conditions in various regions, especially in rural areas. The positive impact also extends to individuals, with women primarily benefiting. This explains the rapid growth of this sector in Morocco. The Office for the Development of Cooperatives (ODCo) recently published statistics on Morocco’s cooperative sector for the end of 2021. In six years (from 2015 to 2021), the number of cooperatives has tripled, from 15, 735 to 47, 609, bringing the total number of members to 689, 617 (ODCo, 2023). This article highlights the characteristics of women cooperatives in Morocco through the case study of women’s cooperative of Souss Massa region. Unique aspects of women's participation will be explored by presenting the results of a comprehensive survey of cooperatives in the Souss Massa region (SM), covering all genders. The results of this survey represent the first phase of a research project entitled “Collective entrepreneurship as a driver of sustainable development: a case study of cooperatives in the Souss Massa region.†In the first part we will review the history of the cooperative movement in Morocco from independence to today. This will allow us to better understand the special entrepreneurial spirit that characterizes this industry. Subsequently, through the above survey results, an overview of women's cooperatives is revealed. |
| Keywords: | Cooperative, SSE, Gender, Entrepreneurship, Morocco, Souss Massa, Management, development policy |
| JEL: | A3 L3 M2 O1 R1 Z1 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2402&r= |
| By: | Szepanski, Achim |
| Abstract: | FROM THE ARTICLE: At first glance, it would appear that Deleuze’s concept of structure involves a complex form of so-called creorder, a term that appears at the forefront of the methodological findings of the economists Bichler/Nitzan. If the structure is actualized in each of its moments in processes, then Bichler/Nitzan describe this process with the term “creorder”. They consider this to be a highly artificial term, which is intended to indicate that a structure/order must constantly construct and reconstruct itself in (historical) time, just as a form must constantly transform itself. According to Bichler/Nitzan, in the context of creorder, the meaning of the relationship between Heraclitean becoming and Parmenidean being lies precisely in the fact that the fusion of verb and noun results in the term “creorder”: “To have a history is to create order – a verb and a noun whose fusion yields the verb-noun creorder.” On the one hand, the so-called creorder may be completely vertically or hierarchically ordered, as is the case in ultra-bureaucratic systems, for example; on the other hand, it may also be horizontal, as could be the case in radical democracies, or it may be in between order and disorder. |
| Keywords: | capital accumulation, capital as power, creorder, capitalization, differential accumulation, dominant capital, finance, Marxism, neoclassical economics, quantification, value |
| JEL: | P00 P1 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:295212&r= |
| By: | Andreas Bergh (Department of Economics, Lund University, Sweden; Research Institute of Industrial Economics, Stockholm, Sweden); Christian Bjornskov (Research Institute of Industrial Economics, Stockholm, Sweden; Department of Economics, Aarhus University, Denmark); Ludek Kouba (Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Czech Republic) |
| Abstract: | The discussion of the growth consequences of socialism has fulminated for a century, sparked off by the Calculation Debate in the 1920s and 30s, and has concerned the performance of the Soviet Union in the 1950s and the mixed development in the 1990s after communism collapsed in Central and Eastern Europe. We aim to inform these debates by providing an empirical assessment of how socialist economies performed across the second half of the 20th century. Using both neighbour comparisons as well as more formal empirical analysis of developing countries that turned socialist after independence, we derive a set of estimates of the degree to which the introduction of a planned socialist economy affects long-run growth and development. All analyses point towards an annual growth decline of approximately two percentage points during the first decade after implementing socialism. |
| Keywords: | economic growth, socialism |
| JEL: | O11 O43 P20 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:men:wpaper:95_2024&r= |
| By: | Ingar K. Haaland; Christopher Roth; Stefanie Stantcheva; Johannes Wohlfart |
| Abstract: | We survey the recent literature in economics measuring what is on top of people's minds using open-ended questions. We first provide an overview of studies in political economy, macroeconomics, finance, labor economics, and behavioral economics that have employed such measurement. We next describe different ways of measuring the considerations that are on top of people's minds. We also provide an overview of methods to annotate and analyze such data. Next, we discuss different types of applications, including the measurement of motives, mental models, narratives, attention, information transmission, and recall. Our review highlights the potential of using open-ended questions to gain a deeper understanding of mechanisms underlying observed choices and expectations. |
| JEL: | C90 D83 D91 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32421&r= |
| By: | Domenico Delli Gatti; Filippo Gusella; Giorgio Ricchiuti |
| Abstract: | Given the unobserved nature of expectations, this paper employs latent variable analysis to examine three financial instability models and assess their out-of-sample forecasting accuracy. We compare a benchmark linear random walk model, which implies exogenous instability phenomena, with a linear state-space model and a nonlinear Markov regime-switching model, both of which postulate endogenous fluctuations phenomena due to heterogeneous behavioral heuristics. Using the S\&P 500 dataset from 1990 to 2019, results confirm complex endogenous dynamics and suggest that the inclusion of behavioral nonlinearities improves the model's predictability both in the short, medium, and long run. |
| Keywords: | Endogenous instability, exogenous instability, behavioral model, forecasting analysis |
| JEL: | C13 C51 E37 G01 G10 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_05.rdf&r= |
| By: | Marion POUZOULET (Sciences Po Bordeaux / France ESS Forum International, Paris (France)) |
| Abstract: | Through the past decade, United Nations (UN) agencies have developed various initiatives in favor of the promotion of the Social and Solidarity Economy (SSE): the creation of the UNTFSSE in 2013, the adoption of a resolution in the International Labor Conference in June 2022, the annual ILO Academy on SSE, etc. The SSE transnational networks, which are still trying to legitimate the SSE at the international level, often quote these activities as strong institutional support to the SSE. However, this emphasis raises questions about the actual place of SSE concerns in the UN system. The hypothesis here is that, despite the big announcements, SSE (and the few agents who promote it) occupy(s) a fringe position within the UN agencies. Based on a set of semi-directive interviews with UN agents, this paper provides an opportunity to understand why, despite the absence of a general guideline, SSE has made its way into the agenda of several UN agencies. The analysis assumes that, before being an institutional interest, this appetence for SSE is the result of the commitment of several UN staff. The underlying objective is also to understand whether the emergence of SSE within the UN agencies has produced 'innovations' and 'changes' in the institutions. All this research work is facilitated by the author’s position as a Ph.D. student with a CIFRE agreement. This is a French specificity that enables her, in parallel to her research activities, to be a mission officer for SSE International Forum, one of the major networks of SSE actors on an international scale. This position, therefore, facilitates her access to the field and to the agents interviewed, whom she meets regularly in the context of her employed activities. In addition to the interviews conducted, this paper is therefore based on participant observation and analysis of archive documents. |
| Keywords: | SoUnited Nations, SSE, international agenda, international organizations, individual trajectory |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2301&r= |
| By: | Thomas I. Palley |
| Abstract: | This paper introduces the notion of monetary disorder. The underlying theory rests on a twin circuits view of the macro economy. The idea of monetary disorder has relevance for understanding the experience and consequences of the recent decade-long period of monetized large budget deficits and ultra-easy monetary policy. Current policy rests on Keynesian logic whereby a large fall in aggregate demand warrants robust offsetting monetary and fiscal policy actions. That logic neglects potential monetary disorder being bred within the financial circuit in the form of inflated asset prices and leveraged balance sheets. That disorder is likely to develop long before inflation accelerates so that inflation targeting fails to protect against it. Political factors increase the policy danger as the benefits of disorder are front-loaded and the costs backloaded. The paper concludes with a policy discussion regarding how to prevent Keynesian goods market counter-cyclical stabilization policy from causing monetary disorder. |
| Keywords: | Monetary disorder, twin circuits, inflation, asset price bubbles, budget deficits, modern money theory (MMT) |
| JEL: | E00 E12 E30 E40 E63 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:93-2023&r= |
| By: | Bos, Iwan; Maccarrone, Giovanni; Marini, Marco A. |
| Abstract: | Anti-consumerism is a doctrine that aims to discourage excessive consumption because of its damaging effect on the environment. It can either focus on creating psychic costs for consumers (a ‘stick’) or psychic benefits for non-consumers (a ‘carrot’). This paper examines the impact of these two approaches on competition and welfare. The competitive effect is comparable in both cases – anti-consumerism (weakly) reduces competitive pressure as well as prices, outputs and profits. In terms of consumer and social welfare, however, the carrot performs strictly better than the stick. |
| Keywords: | Consumer/Household Economics, Public Economics |
| Date: | 2024–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:342916&r= |
| By: | Haldar, Stuti (CIRCLE, Lund University); Grillitsch, Markus (CIRCLE, Lund University); Bazaz, Amir (Indian Institute for Human Settlements) |
| Abstract: | This paper addresses the critical gap in understanding the justice implications of renewable energy transitions, particularly concerning the agency of different actor groups, including marginalised and local communities. Given urgency of transitioning to renewables to mitigate climate risks, it highlights the need for more human centric approaches to ensure equitable outcomes. To bridge this gap, the study proposes a theoretical framework centered on the capability approach, human agency, and energy justice. This framework demonstrates how capability sets shape human agency and influence the trajectory of transitions. Through a case study of the Pavagada Solar Power Park in India, the study exemplifies the practical application of this framework, exploring how policy interventions can enhance capability sets and empower communities throughout transition processes. By surfacing the mechanisms through which capability enhancement can foster more just outcomes, this research seeks to inform policymakers, practitioners, and scholars navigating the complexities of just energy transitions. Overall, this study contributes to advancing the discourse on energy justice and offers actionable insights for achieving more equitable and resilient energy transition pathways. |
| Keywords: | energy justice; energy transitions; institutional work; human agency; capability approach |
| JEL: | O20 O44 |
| Date: | 2024–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lucirc:2024_007&r= |
| By: | Sascha Keil (Chemnitz University of Technology); Walter Paternesi Meloni (Sapienza University of Rome) |
| Abstract: | Over the past decades, models of circular and cumulative causation, based on the endogenous relations between prices, exports, and labour productivity, have lost prominence in explaining economic dynamics. We argue that, in the absence of counterbalancing mechanisms, the combination of price-sensitive exports and the triggering effect of exports on productivity can enable feedback loops and can significantly shape macroeconomic reality in the short-to-medium run. We apply an adapted export-led model of cumulative causation to 10 major countries belonging the Euro area, a region characterized by divergent wage growth trajectories reflected in divergent export competitiveness and lack of equilibrating mechanisms. Specifically, the model is tested for the period 1995–2020 employing a country-level system of equations (3SLS-ARDL). Our findings indicate that for the majority of the countries examined, this feedback mechanism – comprising price-sensitive exports and export demand affecting productivity growth – exacerbates macroeconomic disparities in terms of labour productivity. While nominal wages act as a potential trigger through their impact on price competitiveness, they also serve as a central factor that retards the feedback mechanism due to the Verdoorn effect of wage-induced demand. Overall, our results affirm the significance of price-induced and export-led theories of cumulative causation while also delineating its limitations, particularly regarding price competitiveness-oriented export-led growth strategies. |
| Keywords: | international trade, export, competitiveness, unit labour cost, wages, productivity, European imbalances |
| JEL: | F16 F41 J30 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:tch:wpaper:cep063&r= |