nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2005‒04‒24
six papers chosen by
Karl Petrick
Leeds Metropolitan University

  3. Mathematics and Economics: Use, Misuse, or Abuse? From Walrasian Deductivism to Demaria's Hypothetical Inferences By Francesco Boldizzoni; Arnaldo Canziani
  4. Creating Incentives for Micro-Credit Agents to Lend to the Poor By Cecile Aubert; Alain de Janvry; Elisabeth Sadoulet
  5. Heterogeneous Multiple Bank Financing, Optimal Business Risk and Information Disclosure By Christina E. Bannier (geb. Metz)
  6. Heterogeneous Multiple Bank Financing Under Uncertainty: Does it Reduce Inefficient Credit Decisions? By Christina E. Bannier (geb. Metz)

    Abstract: The main purpose of this paper is to discuss the limitations of the market and the risks of government failure, and to present an alternative approach on coordination of economic activities by introducing the concept of “coordination system”. In such a system, economic activities are coordinated by market, firms and government requiring the availability of “non-price factors” such as infrastructure, institutions and organizations. This approach is practical, country specific and dynamic. It is practical because it is based on the realities of the world economy and the situations of developing countries. It is country specific because the relative role of each coordination mechanism – market, government and enterprises – changes from one country to another, depending on their level of development and other socio-economic characteristics. It is dynamic because in each country the relative role of each mechanism changes over time during the course of economic development of the country.
    Date: 2004
  2. By: Irfan ul Haque
    Abstract: The paper discusses the issue of globalization from the perspective of employment and labour. It argues that it is the ideological basis of policy prescriptions advanced in support of globalization, rather than the increasing global interdependence, that is the real source of controversy and anxiety over globalization. The paper discusses the impact of the neoliberal policies on economic growth, employment, and income distribution, and examines the issue of labour market rigidities from the perspective of industrial as well as developing countries. It argues that developing countries face conflicting pressures: the new liberal policies prescribe liberalization of labour markets, while the organized labour in the industrial countries is pushing for higher labour standards in developing countries. The paper concludes with a section containing ideas on how the process of globalization may be humanized, so that the gains from the growth in incomes and trade are more widely shared within as well as across countries in an increasingly interdependent world.
    Date: 2004
  3. By: Francesco Boldizzoni (Università Bocconi); Arnaldo Canziani (Università di Brescia)
    Abstract: The development of a mechanistic analytical approach – since mid-19th century to WWI, and beyond – is a well-known story in European economic thought, the story of Cournot, Jevons, Walras, Edgeworth, Pareto, and many others. We could refer to this tradition as “mathematical deductivism”, i.e. the use of mathematics as a demonstrative tool, which implies plenty of axioms and theorems, generally connected to maximizing behaviours. But along the 20th century, both the diffusion of more sophisticated mathematics and ‘political’ circumstances – mainly the Keynesian claim to build workable theories – opened a new phase, the “mathematical descriptivism”: mathematics started to be used to give form to the economic matter, and to satisfy the simplest requirements of economic policy as well. Contrary to these vulgatae, a third use of mathematics could be anyway suggested, the approach based on “multiple indeterminations”. Within such a framework, economic dynamics is treated in more and more flexible ways by n degrees of freedom, so reflecting the stochastic complexity of the economic reality. To carry out this task, the paper goes through the work of three Italian pioneers of the 20th century (Demaria, Brambilla, De Finetti) analyzing the interactions between social exogenous variables and their endogenous effects.
    JEL: B23 B40 C00 C60
    Date: 2005–04–16
  4. By: Cecile Aubert (Universite Paris Dauphine); Alain de Janvry (University of California, Berkeley); Elisabeth Sadoulet (University of California, Berkeley)
    Abstract: Microfinance institutions (MFIs) have introduced incentive pay schemes for their credit agents to induce information acquisition on borrowers. Bonuses linked to repayment are efficient for profit-oriented MFIs but insufficient for non-profit MFIs trying to reach very poor borrowers, when repayment and wealth are positively correlated. We show that no incentive scheme is consistent with this (non-verifiable) objective: Random audits on the share of very poor borrowers selected by the agent become necessary. Under the optimal contract, non-profit MFIs generally maximize the number of poor borrowers it services by cross-subsidization between very poor and less poor borrowers.
    Keywords: micro-credit, pro-poor objectives, incentives,
    Date: 2004–06–01
  5. By: Christina E. Bannier (geb. Metz)
    Abstract: This paper studies optimal risk-taking and information disclosure by firms that obtain financing from both a “relationship” bank and “arm’s-length” banks. We find that firm decisions are asymmetrically influenced by the degree of heterogeneity among banks: lowly-collateralized firms vary optimal risk and information precision along with the degree of relationship lending for projects with low expected cash-flows, while highly-collateralized firms do so for projects with high expected cash-flows. Incidences of inefficient project liquidation are minimized if the former firms rely on relationship banking to a low degree, the latter to a large degree.
    JEL: G21 L14 D82
    Date: 2005–03
  6. By: Christina E. Bannier (geb. Metz)
    Abstract: Small and medium-sized firms typically obtain capital via bank financing. They often rely on a mixture of relationship and arm’s-length banking. This paper explores the reasons for the dominance of heterogeneous multiple banking systems. We show that the incidence of inefficient credit termination and subsequent firm liquidation is contingent on the borrower’s quality and on the relationship bank’s information precision. Generally, heterogeneous multiple banking leads to fewer inefficient credit decisions than monopoly relationship lending or homogeneous multiple banking, provided that the relationship bank’s fraction of total firm debt is not too large.
    JEL: G21 L14 D82
    Date: 2005–03

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