nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒11‒28
nine papers chosen by
Karl Petrick
University of the West Indies

  1. Technology, Distribution and the Rate of Profit in the US Economy: Understanding the Current Crisis By Deepankar Basu; Ramaa Vasudevan
  2. Effects of Legal and Unauthorized Immigration on the U.S. Social Security System By Hugo Benítez-Silva; Eva Cárceles-Poveda; Selçuk Eren
  3. The crisis in context democratic capitalism and its contradictions By Streeck, Wolfgang
  4. The "Austerity Myth": Gain without Pain? By Perotti, Roberto
  5. Exploitation of Labour and Exploitation of Commodities: A "New Interpretation" By Yoshihara, Naoki; Roberto Veneziani
  6. The Greek Debt Crisis: Suggested Solutions and Reforms By Leo Michelis
  7. Growth strategies in a greener world By Nabeshima, Kaoru
  8. Independent Human Rights Institutions for Children and the Committee on the Rights of the Child Reporting Process By Rébecca Steward; UNICEF Innocenti Research Centre
  9. Land, Poverty and Human Development in Kenya By Mwangi wa Githinji

  1. By: Deepankar Basu (University of Massachusetts Amherst); Ramaa Vasudevan
    Abstract: This paper offers a synoptic account of the state of the debate within Marxist scholars regarding the current structural crisis of capitalism, identifies two broad streams within the literature dealing, in turn, with aggregate demand and profitability problems, and proceeds to concentrate on an analysis of issues surrounding the profitability problem in two steps. First, evidence on profitability trends for the Nonfarm Nonfinancial Corporate Business, the Nonfinancial Corporate Business and the Corporate Business sectors in post-War U.S. are summarized. A broad range of profit rate measures are covered and data from both the U.S. Bureau of Economic Analysis (NIPA and Fixed Asset Tables) and the Federal Reserve (Flow of Funds Account) are used. Second, the underlying drivers of profitability, in terms of technology and distribution, are investigated. The profitability analysis is used to offer some hypotheses about the current structural crisis. JEL Categories: B51, E11
    Keywords: profitability, technological change, income distribution, structural crisis
    Date: 2011–11
  2. By: Hugo Benítez-Silva (SUNY-Stony Brook); Eva Cárceles-Poveda (SUNY-Stony Brook); Selçuk Eren (Levy Economics Institute of Bard College)
    Abstract: Immigration is having an increasingly important effect on the social insurance system in the United States. On the one hand, eligible legal immigrants have the right to eventually receive pension benefits, but also rely on other aspects of the social insurance system such as health care, disability, unemployment insurance, and welfare programs, while most of their savings have direct positive effects on the domestic economy. On the other hand, most undocumented immigrants contribute to the system through taxed wages, but they are not eligible for these programs unless they attain legal status, and a large proportion of their savings translates into remittances, which have no direct effects on the domestic economy. Moreover, a significant percentage of immigrants migrate back to their countries of origin after a relatively short period of time, and their savings while in the US are predominantly in the form of remittances. Therefore, any analysis that tries to understand the impact of immigrant workers on the overall system has to take into account the decisions and events these individuals face throughout their lives, as well as the use of the government programs they are entitled to. We propose a life-cycle OLG model in a General Equilibrium framework of legal and undocumented immigrants’ decisions regarding consumption, savings, labor supply and program participation to analyze their role in the financial sustainability of the system. Our analysis of the effects of potential policy changes, such as giving some undocumented immigrants legal status, shows increases in capital stock, output, consumption, labor productivity, and overall welfare. The effects are relatively small in percentage terms, but considerable given the size of our economy.
    Date: 2011–09
  3. By: Streeck, Wolfgang
    Abstract: The 'financial crisis' and its sequel, the current sovereign debt crisis, appear to be the latest permutations of an old conflict between capitalism and democracy that forcefully reasserted itself after the end of the postwar growth period. Today's calamities were preceded by high inflation in the late 1960s and 1970s, rising public deficits in the 1980s, and growing private indebtedness in the 1990s and 2000s. In each case, governments were faced with popular demands for prosperity and security that were incompatible with market allocation. Inflation, deficits and financial under-regulation should not be understood as results of faulty economic management but rather as temporary stopgaps to simultaneously satisfy democratic-political claims for social justice and economic claims for profitability. As the site of distributional conflict moved with time from the labor market and industrial relations to the politics of public spending, then to the provision of credit to private households, and from there to international fiscal diplomacy, it became increasingly insulated against popular democratic pressures. At the same time, the political and economic risks associated with the contradictions of democratic capitalism have increased, with potentially disruptive consequences for the social integration of democratic polities as well as for the system integration of advanced market economies. -- Die sogenannte Finanzkrise von 2008 und die anschließende Krise der Staatsfinanzen müssen als jüngste Manifestation eines alten Konflikts zwischen Kapitalismus und Demokratie gesehen werden, der mit dem Ende der Wachstumsperiode der Nachkriegszeit neu aufgelebt ist. Vorläufer der heutigen politisch-ökonomischen Verwerfungen waren die Inflation der späten 1960er und der 1970er Jahre, die steigenden Haushaltsdefizite der 1980er Jahre und die zunehmende Privatverschuldung seit Mitte der 1990er Jahre. In allen Fällen waren demokratische Regierungen mit Forderungen nach steigenden Einkommen und sozialer Sicherheit konfrontiert, die mit einer Allokation von Ressourcen nach den Spielregeln freier Märkte unvereinbar waren. Inflation, Haushaltsdefizite und Unter-Regulierung der Finanzmärkte waren im Kern nicht Folgen fehlerhafter Wirtschaftspolitik, sondern dienten der zeitweiligen Zufriedenstellung demokratisch-politischer Forderungen nach sozialer Gerechtigkeit, die mit wirtschaftlichen Forderungen nach Profitabilität und Verteilung nach Maßgabe marginaler Produktivität unvereinbar waren. In dem Maße, wie die Auseinandersetzung sich vom Arbeitsmarkt und den Arbeitsbeziehungen auf die öffentliche Haushaltspolitik, anschließend auf die Politik der Regulierung des Finanzsektors und von da auf die internationale Geldpolitik verlagerte, wurde der demokratisch-kapitalistische Verteilungskonflikt zunehmend gegen demokratischen Druck von unten isoliert. Gleichzeitig nahmen die den Widersprüchen des demokratischen Kapitalismus inhärenten Risiken zu, mit potenziell schwerwiegenden Folgen sowohl für die soziale Integration demokratischer Gesellschaften als auch die Systemintegration fortgeschrittener Marktwirtschaften.
    Date: 2011
  4. By: Perotti, Roberto
    Abstract: As governments around the world contemplate slashing budget deficits, the "expansionary fiscal consolidation hypothesis" is back in vogue. I argue that, as a statement about the short run, it should be taken with caution. Alesina and Perotti (1995) and Alesina and Ardagna (2010) (AAP) show that fiscal consolidations may be expansionary if implemented mainly by cutting government spending. IMF (2010) criticizes the data and methodology used by AAP, and reach opposite conclusions. I argue that because of the multi-year nature of the large fiscal consolidations, which are precisely the most informative ones, using yearly panels of fiscal policy is limiting. I present four detailed case studies, two -- Denmark and Ireland -- undertaken under fixed exchange rates (the most relevant case for many Eurozone countries today) and two -- Finland and Sweden -- after floating the currency. All four episodes were associated with an expansion; but only in Denmark the driver of growth was internal demand. However, after three years a long slump set in as the economy lost competitiveness. In all the others for a long time the main driver of growth was exports. In Ireland this occurred because the sterling coincidentally appreciated. In Finland and Sweden the currency experienced an extremely large depreciation after floating. In all consolidations interest rate fell fast, and wage moderation played a key role in generating a gain in competitiveness and a decline in interest rates. Wage moderation was facilitated by the direct intervention of the government in the wage negotiation process. In Finland and Sweden, the adoption of inflation targeting at the same time of the consolidation helped the decline in interest rates. These results cast doubt on at least some versions of the expansionary fiscal consolidations hypothesis, and on its applicability to many countries in the present circumstances. A depreciation is not available to EMU members today (except vis à vis countries outside the Eurozone). A net export boom is not feasible for the world as a whole. A further decline in interest rates is unlikely in the current situation. And incomes policies are not popular nowadays; moreover, international experience, and the Danish case, suggest that they are ineffective after a few years.
    Keywords: expansionary fiscal consolidations
    JEL: E62 E65 F32
    Date: 2011–11
  5. By: Yoshihara, Naoki; Roberto Veneziani
    Abstract: In the standard Okishio-Morishima approach, the existence of profits is proved to be equivalent to the exploitation of labour. Yet, it can also be proved that the existence of profits is equivalent to the ‘exploitation’ of any good. Labour and commodity exploitation are just different numerical representations of the productiveness of the economy. This paper presents an alternative approach to exploitation theory which is related to the New Interpretation (Duménil 1980; Foley 1982). In this approach, labour exploitation captures unequal social relations among producers. The equivalence between the existence of profits and labour exploitation holds, whereas it is proved that there is no relation between profits and commodity ‘exploitation’.
    Keywords: Exploitation, Profits, Generalised Commodity Exploitation Theorem, New Interpretation
    JEL: D46 B51
    Date: 2011–11
  6. By: Leo Michelis (Ryerson University; The Rimini Centre for Economic Analysis (RCEA))
    Abstract: This paper examines eight suggested solutions to the Greek debt crisis and six political and institutional reforms in order to achieve a single objective: eliminate deviations from the EU benchmark and thus transform the country into a modern EU state. In the absence of a national political consensus to tackle the debt crisis and implement political and institutional reforms, a new political force should be formed to accomplish these tasks, and also embrace the "frustrated" or "Facebook" generation’s demands for better living standards and more equitable income distribution.
    Keywords: Debt crisis, bank runs, euro zone, economic reforms, political reforms
    JEL: H63 G21 E44 F15 P48
    Date: 2011–11
  7. By: Nabeshima, Kaoru
    Abstract: Two new developments in the global landscape - growing concerns towards global warming and the rising prices of commodities – require countries to craft new growth strategies. These recent developments in the global market offer fresh industrial opportunities as well as difficulties for developing countries embarking on industrialization. In this paper, we examine current developments in global market that would affect industrialization prospects in East Asia and explores development strategies that are suitable for development based on export oriented manufacturing industries in a green world.
    Keywords: East Asia, Southeast Asia, Industrialization, Climatic change, Economic development, Development plans, Green growth, Environment and trade
    JEL: F18 O14 Q01
    Date: 2011–11
  8. By: Rébecca Steward; UNICEF Innocenti Research Centre
    Abstract: The Committee on the Rights of the Child has been one of the main instigators for the development of independent human rights institutions for the promotion and protection of children’s rights. Relying on article 4 of the Convention on the Rights of the Child, it adopted a general comment on this issue in 2002, and now consistently encourages State parties to establish or strengthen such institutions in its concluding observations. Efforts have been made recently with human rights treaty bodies to enhance the involvement of independent institutions at each stage of the reporting process. For independent institutions specifically in charge of monitoring children’s rights, this implies an important contribution to the work of the Committee. Their status of independence from their government in the reporting process has been emphasized and some institutions submit a separate report to the Committee.
    Keywords: children's councils; children's rights; convention on the rights of the child; evaluation; implementation of the crc; international instruments; monitoring; ombudsman for children;
    JEL: H0
    Date: 2011
  9. By: Mwangi wa Githinji (University of Massachusetts Amherst)
    Abstract: The question of poverty has become central to the work of development economists in the last decade and a half. The 2000 World Development Report was entitled Attacking Poverty and the UN held a series of World Conferences in the 1990s, all of which addressed in some form or fashion the problem of poverty. Despite this and because of limited data there has been relatively little empirical work at the household level on determinants of poverty in Africa generally and Kenya specifically. In the few econometric studies that have been done for Kenya land has not been a significant determinant of poverty. This is a surprising result for a country where 80 per cent of the population depends on agriculture. Further the little that has been done has not incorporated the role of human development in the determination of poverty. Via an examination of a nationwide sample this paper will examine the role that land and social capital play in determining households poverty status in rural Kenya in addition to the standard theorized determinants. JEL Categories: O150, Q150
    Keywords: Poverty, Rural, Land, Kenya, Africa, Human Development
    Date: 2011–11

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