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on Heterodox Microeconomics |
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Issue of 2025–01–20
fifteen papers chosen by Carlo D’Ippoliti, Università degli Studi di Roma “La Sapienza” |
| By: | Joseph E. Stiglitz |
| Abstract: | Capitalism since its inception has been marked by large fluctuations. The resulting episodic unemployment has been very costly. This paper provides an overview of alternative theories. Standard models (such as DSGE) have not provided insights into the causes of the fluctuations and the shocks buffeting the economy, which contrary to what they assume, are largely endogenous; they have not provided an understanding of how and why the economy amplifies shocks and makes their effects at times so persistent or how and why there may be oscillatory behavior, rather than a smooth convergence back to some (temporary) equilibrium. Accordingly, they do not give guidance on how to make deep downturns—those that really matter—less frequent, shallower, and less costly. By contrast, there are alternative, new models, often building on older Keynesian foundations, with heterogenous capital goods and heterogeneous agents, interacting with each other in imperfect markets and fragile networks, with endogenous innovation in an ever-evolving economy, with deep uncertainty. These theories, with endogenously driven fluctuations, provide greater insights in the causes and nature of fluctuations, and better policy guidance. |
| JEL: | C62 D84 E12 E32 E44 N30 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33218 |
| By: | Venkat Ram Reddy Ganuthula |
| Abstract: | This paper introduces Agency-Driven Labor Theory as a new theoretical framework for understanding human work in AI-augmented environments. While traditional labor theories have focused primarily on task execution and labor time, ADLT proposes that human labor value is increasingly derived from agency - the capacity to make informed judgments, provide strategic direction, and design operational frameworks for AI systems. The paper presents a mathematical framework expressing labor value as a function of agency quality, direction effectiveness, and outcomes, providing a quantifiable approach to analyzing human value creation in AI-augmented workplaces. Drawing on recent work in organizational economics and knowledge worker productivity, ADLT explains how human workers create value by orchestrating complex systems that combine human and artificial intelligence. The theory has significant implications for job design, compensation structures, professional development, and labor market dynamics. Through applications across various sectors, the paper demonstrates how ADLT can guide organizations in managing the transition to AI-augmented operations while maximizing human value creation. The framework provides practical tools for policymakers and educational institutions as they prepare workers for a labor market where value creation increasingly centers on agency and direction rather than execution. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.01448 |
| By: | Brzustowski, Thomas; Caselli, Francesco |
| Abstract: | We develop and formalize an equilibrium concept for a dynamic economy in which production takes place in worker cooperatives. The concept rules out allocations of workers to cooperatives in which a worker in one cooperative could move to a different cooperative and make both herself and the existing workers in the receiving cooperative better off. It also rules out allocations in which workers in a cooperative would be made better off by some of the other workers leaving. We also provide a minimum-information equilibriumselection criterion which refines our equilibrium concept. We illustrate the application of our concept and refinement in the context of an overlapping-generation economy with specific preferences and technology. The cooperative economy follows a dynamic path qualitatively similar to the path followed by a capitalist economy, featuring gradual convergence to a steady state with constant output. However the cooperative economy features a static inefficiency, in that, for a given aggregate capital stock, firm size is smaller than what a social planner would choose. On the other hand, the cooperative economy cannot be dynamically inefficient, and could accumulate capital at a rate that is higher or lower than the capitalist economy. As a result, steady-state income per worker could be higher or lower in the cooperative economy. We also present an illustrative calibration which quantitatively compares steady-state incomes and welfare in a cooperative and in a capitalist economy. |
| JEL: | J54 |
| Date: | 2024–11–18 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125535 |
| By: | Ghassan, Hassan Belkacem; Krichene, Noureddine |
| Abstract: | This paper theoretically investigates financial stability and assesses the impacts of central bank policies on the banking system. The Islamic finance system has empirically shown relative stability to the waves of the 2007-2008 international financial crisis and reduced volatility of global financial markets. By using the sharing rule and stochastic dominance, we prove that the investor’s expected payoff in the stochastic return model is superior and falls between the expected payoffs of the investor and financier in the fixed return model, respectively. Financial instability can stem from banking and financial markets deviations, asset bubbles, and money market fluctuations. Current economic and financial theories, rooted in the risk-shifting and interest rate smoothing models, have proven inadequate. New principles are needed to address financial instability and mitigate the devastating impacts of financial crises. Western attempts to address financial instability will prove unattainable as long as they depend on banking interest and credit multiplier systems. From the Islamic economics paradigm, financial stability hinges on two key conditions: the prohibition of interest rates and the institutionalization of contractual finance in accordance with Islamic Shariah. We propose that synchronized (or desynchronized) interactions between financial and business cycles positively (or negatively) affect both the banking system and the real economic domain, leading to stable (or unstable) states. Given the financial system’s prohibition of interest rates and the real economy’s adherence to Shariah jurisprudence, we theoretically envisage that the series of procyclical and countercyclical behaviors of financial variables would contribute to improve the financial stability since the financial cycle is too close to real cycle. |
| Keywords: | Financial stability, Synchronization, Financial cycle, Profit-Loss-Sharing finance, Shadow banking, Monetary policies, Policy reforms, Policy analysis. |
| JEL: | G2 |
| Date: | 2023–08–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122963 |
| By: | Gobbi, Lucio; D'Ippoliti, Carlo; Temperini, Jacopo |
| Abstract: | In this paper we analyze the impact of less conventional monetary policy tools on the personal and functional distribution of income. We focus on the issuance of central bank digital currency (CBDC) in a comparative perspective, using a stock-flow consistent model of the eurozone economy. We consider two kinds of policies: helicopter money policies such as Quantitative Easing and the issuance of a CBDC; and scenarios not based on balance sheet expansions, such as an interest rate policy following the Pasinetti Rule, or a sterilized issuance of CBDC. Monetary policies using CBDCs tend to increase the wage share at the expense of financial rents. The targeted issuance of CBDCs to firms might produce an increase in GDP, corporate profits, and the wage share. The Pasinetti Rule reduces personal income inequality the most, but if applied mechanically, its impact on growth is also the least desirable. |
| Keywords: | Inequality; Monetary policy; Central Bank Digital Currencies; Pasinetti Rule |
| JEL: | E12 E5 G0 I3 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122934 |
| By: | Domenico Delli Gatti; Roberta Terranova; Enrico Maria Turco |
| Abstract: | Can standard measures of industrial policy such as R&D subsidies or financial support for machine replacement be effective tools to reverse the current pattern of increasing market power and declining business dynamism? To answer this question we explore the effects of various industrial policy instruments in a macroeconomic agent-based model calibrated to reproduce the decline in US business dynamism over the last half-century. Our results indicate that R&D subsidies alone are insufficient to address the underlying causes of declining dynamism. They become effective, however, when combined in a policy mix with knowledge diffusion policies, particularly those favoring advanced technology adoption by small firms. In this case, industrial policy fosters growth by closing the productivity gap between leaders and laggards, and thereby curbing market power. These findings suggests a two-pronged approach to the design of industrial policy, integrating firm-level subsidies with knowledge diffusion measures and therefore ensuring that innovation and competition policies advance together. |
| Keywords: | macroeconomic dynamics, innovation, knowledge diffusion, market power, industrial policy, agent-based model |
| JEL: | C63 E32 L10 L52 O31 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11544 |
| By: | Caterina Manicardi; Maria Enrica Virgillito |
| Abstract: | How has the distribution of unpaid working time between men and women evolved over the last twenty years? Does unpaid working time still disproportionately affect women, more than fifty years after the massive entry of the female labour force into formal employment? And, if so, which market and non-market factors drive this stratification and could possibly facilitate the transition out of an unequal intrahousehold division of labour? This paper leverages the most complete dataset collecting individual time diaries, the ATUS-CPS 2003-2022, to investigate the role of market variables − such as real wages, household income, industry and occupation − vis-à -vis non-market factors − such as gender, race, household type and state of residence − in explaining variations in unpaid time allocation. By exploiting both the cross-sectional and panel dimensions of the dataset, we provide novel evidence on individual time allocation and its gendered distribution, integrating an intersectional perspective that looks at the role of income classes and socio-material conditions in affecting the likelihood of escaping disproportionate exposure to unpaid work. Our results indicate that, despite clear class-based patterns, belonging to the upper income class is not enough for women to escape disproportionate burdens. |
| Keywords: | Time use, Labour supply, Unpaid work, Gender imbalances |
| Date: | 2025–01–10 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2025/01 |
| By: | Lorenzo Cresti; Dario Mazzilli; Aurelio Patelli; Angelica Sbardella; Andrea Tacchella |
| Abstract: | This paper investigates the structural vulnerabilities and competitive dynamics of the EU27 automotive sector, with a focus on the complexity and the fragmentation of production processes across global value chains. Employing a mixed-methods approach, our analysis integrates input-output tables to quantify the sector's reliance on non-EU economic branches, alongside an economic complexity framework to assess the underlying productive capabilities of European countries in automotive-related industries. The findings indicate an increasing dependency on extra-EU suppliers, particularly China, for critical components such as lithium-ion batteries, which heightens supply chain risks. Currently, Eastern European countries-most notably Poland, Czechia, and Hungary-have enhanced their competitiveness in the production of automotive components, surpassing traditional leaders such as Germany. The paper advances the literature by providing a novel, granular list of 6-digit products within the automotive supply chain and offers new insights into the challenges posed by the ongoing electric mobility transition in the European Union, particularly in relation to electric accumulators. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.01781 |
| By: | Gupta, Shivansh; Blight, Meaghan |
| Abstract: | This study systematically examines the impact of conservative ideologies on gender dynamics, focusing on women and families in the USA and India since 2010. By employing both qualitative and quantitative analysis, the research delves into the socio-political landscapes of both countries to identify how conservative movements, policies, and cultural norms have influenced gender roles and expectations. Data were collected through an extensive literature review and policy analysis. The research provides a detailed definition of conservatism in both India and the USA, noting its promotion of profit and output and the associated gender roles and systemic oppression. It also acknowledges that the definition of conservatism can vary based on different perspectives. The historical context of conservatism is explored, examining its evolution in India and the USA and identifying factors such as religion, post-colonialism, male dominance, economic conditions, biological perspectives, and cultural influences contributing to its popularity. The study highlights significant events and their impacts on gender equality and rights, as well as the current state of conservatism in both countries. The research investigates the theoretical framework of gender roles and expectations under conservative ideologies, presenting arguments for and against conservatism's impact on gender dynamics. In India, the focus is on the BJP's policies and their effects on women's political representation, economic opportunities, and social norms. In the USA, the analysis centres on the Republican Party's influence during the Trump administration and its implications for gender roles and societal norms. Central to the study is Project NeoWave, the fifth wave of feminism, which addresses gender minority development. The research details the emergence and characteristics of this movement, discussing the influence of radical feminism and its associated critiques. It explores new ideas such as nuanced rights for women, the concept of new domesticity, and systemic changes aimed at altering men's mindsets towards equality. A comparative analysis identifies critical similarities and differences in conservatism's economic, political, social, and cultural impacts on gender dynamics in both countries. This includes examining employment opportunities, wage gaps, political representation, societal expectations, and the influence of religion and traditional values. The research evaluates existing policies and mitigation efforts for gender and minority development, highlighting successful initiatives and proposing future recommendations. By integrating Project NeoWave’s progressive principles with conservative values, the study aims to formulate effective policies that support gender and minority development. This research advances the discourse on conservatism’s role in shaping gender dynamics, offering valuable insights for policymakers, scholars, and advocates. By establishing a comprehensive framework for understanding these dynamics, the study contributes to developing tailored strategies for fostering a more equitable society. |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:jp3ev |
| By: | Buskens, Vincent (Utrecht University); Corten, Rense; Przepiorka, Wojtek (Utrecht University) |
| Abstract: | Behavioral experiments are rarely used as an empirical strategy in computational social science, where empirical studies typically focus on analyzing large-scale digital trace data. We argue that behavioral experiments have a role in computational social science, in particular in combination with agent-based modeling – a key theoretical strategy in computational social science. We highlight three ways in which behavioral experiments can contribute to theory building in computational social science: by testing macro-level predictions from agent-based models, by evaluating behavioral assumptions on which these models are based, and by calibrating agent-based models. We illustrate these points through three examples from our work concerned with the emergence of conventions. |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:9vm5t |
| By: | Federico M. Accursi; Raúl Bajo-Buenestado; Raul Bajo-Buenestado |
| Abstract: | Cooperatives, formally established to enhance social welfare and local economic development, often face pressures that divert them from these foundational goals and lead to their transformation into profit-driven entities that exploit market power. Leveraging an unexpected tax change following a vote of no confidence, we examine the pass-through to retail prices as a test for market power, using data from over 250 cooperatives operating in the Spanish fuel market. Our findings reveal a complete pass-through of the tax increase to retail prices. Additionally, descriptive evidence suggests that cooperatives consistently offer lower prices than their for-profit counterparts. These results are indicative of the absence of markup adjustments and market power exertion among cooperatives and are consistent with their prioritization of consumer welfare over profit maximization, thereby justifying the regulatory advantages they enjoy. |
| Keywords: | cooperatives, pass-through to prices, market power, firm conduct, retail fuel market |
| JEL: | D22 H22 H32 L21 L29 P13 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11473 |
| By: | Alexander Guschanski; Özlem Onaran |
| Abstract: | We analyse UK markups and profit margins for the pandemic period and its aftermath using unconsolidated balance sheets of non-financial corporations for both listed and unlisted firms. The markup increases by 14.7% between 2014 and 2022, exceeding any previously documented growth rate for UK markups, despite major economic, ecological and geo-political crises. The rise in markups is driven by both increasing markups within UK companies and a reallocation of output towards high-markup firms. However, the within effect has dominated since 2020, driven by large firms. In this regard, the UK is different from the US, where the reallocation effect has been more prominent. Since 2014, the markup distribution of firms has become more polarised. Increasingly more firms are at risk of financial difficulties due to low profit margins while at the same time some firms are charging historically extraordinarily high markups and reap high profits. This contributes to bankruptcy risk and economic instability while exacerbating pricing power for some companies. Preventing markup increases during macroeconomic shocks should be a priority for policymakers seeking to reduce inflationary pressure and adverse effects on income inequality. |
| Keywords: | markup, profit margin, market power |
| JEL: | D40 J30 L10 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2501 |
| By: | Mitsch, Frieder; Hassel, Anke; Soskice, David |
| Abstract: | This paper examines Germany’s distinctive path toward the knowledge economy, emphasizing the role of regional innovation dynamics and governance, with a focus on Southern Germany’s high-innovation clusters. Unlike other advanced economies that pivoted toward high-tech services, Germany has prioritized digital advancements within its manufacturing base, creating a model driven by smart manufacturing and Industry 4.0. We argue that regional growth coalitions, formed by firms, social partners, and local governments, foster institutional configurations supporting knowledge-based and innovation-focused competition. This regionalized governance has enabled Southern Germany to capitalize on Germany’s innovation agenda, a success that other regions have struggled to replicate. By analysing multi-scalar dynamics—interactions across regional, national, and EU levels—our study expands evolutionary economic geography (EEG) and political economy literature, challenging traditional, nation-centric frameworks. Our findings highlight that cohesive regional governance can enhance national and supranational innovation strategies, underscoring the importance of regional institutions in advancing and sustaining knowledge economy innovation. |
| JEL: | O33 R11 L52 O18 |
| Date: | 2024–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126264 |
| By: | Hartley, Tilman |
| Abstract: | There are calls to better incorporate humans into Earth system models. Some have attempted this using the concept of ‘carrying capacity’. But the concept of carrying capacity has been subject to forceful critique, as it vastly simplifies the many complex factors which affect human populations. This includes factors related to human behaviour, which is so unpredictable that it seems to resist formalisation altogether. Nevertheless, I suggest that the usefulness of a simplified concept like ‘carrying capacity’ depends on the purposes for which it is used. In toy models intended to elucidate a complex phenomenon, a simplified concept might indeed be useful. On the other hand, in forecast models intended for theory testing, a more complex concept may better approximate observed reality. I illustrate this point by looking at two recent toy models which use the concept of carrying capacity to elucidate idealised population dynamics, and at a series of forecast models which instead aim to estimate the population density of real groups in real conditions. In short, the usefulness of concepts depends on modelling choices, which in turn depend upon the purpose for which a given model has been constructed. |
| Date: | 2024–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:e86bm |
| By: | Stephan Puehringer (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Matthias Aistleitner (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Lukas Cserjan (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Sophie Hieselmayr (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Jan Weber |
| Abstract: | The increasing concentration of income and wealth on the national and international level is a topic that has received increased attention both in social science research as well as public policy debates. While data availability is a well-known and often-lamented problem in wealth studies, especially the group of HNW-households remains largely unexplored. In this study, we aim to contribute to a deeper understanding of the impact of HNW-households and their networks on current wealth distributions. Based on an extensive data set of company ownerships of a sample of the 62 wealthiest Austrian HNW-households, we apply a social network analysis of two-mode networks (institutions and persons) to highlight networks of corporate ownership and (indirect) control. An overall finding is that numerous HNW-networks involve a multitude of legal entities, creating complex and opaque control structures that complicates the tracing of economic ownership. Besides this, our findings show several idiosyncrasies of the super-rich. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ico:wpaper:157 |