nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2012‒03‒08
ten papers chosen by
Karl Petrick
University of the West Indies

  1. It's So Hard to Get Good Help By Dean Baker
  2. Health-insurance Coverage for Low-wage Workers, 1979-2010 and Beyond By John Schmitt
  3. "Too Big to Fail: Motives, Countermeasures, and the Dodd-Frank Response" By Bernard Shull
  4. Understanding Neoliberalism as Economization: The Case of the Ecology By Fikret Adaman; Yahya M. Madra
  5. "The European Central Bank and Why Things Are the Way They Are: A Historic Monetary Policy Pivot Point and Moment of (Relative) Clarity" By Robert Dubois
  6. Fiscal Policy in an Unemployment Crisis By Rendahl, P.
  7. Has IMF Advice Changed After the Crisis? By Rathin Roy; Raquel Almeida Ramos
  8. Asia’s Wicked Environmental Problems By Howes, Stephen; Wyrwoll, Paul
  9. From Property Rights and Institutions, to Beliefs and Social Orders: Revisiting Douglass North’s Approach to Development. By Dellepiane-Avellaneda, Sebastian
  10. The Institutions-Growth Nexus: Stages of Development By Nawaz, Saima

  1. By: Dean Baker
    Abstract: There is a growing chorus of policy analysts and pundits telling the country that we could have millions more jobs in manufacturing, if only we had qualified workers. This claim has the interesting feature that it places responsibility for the lack of jobs on workers, not on the people who get paid to manage the economy (e.g. the Fed, Congress, the White House). This issue brief looks at data that contradicts the suggestion that so many people are out of work because they lack skills.
    Keywords: manufacturing, employment, skills, education
    JEL: E E2 E24 L6 J J2 J21 J24 J3 J31
    Date: 2012–02
  2. By: John Schmitt
    Abstract: This paper uses data from the Current Population Surveys for 1980 through 2011 to review trends in health-insurance coverage rates for low-wage workers (defined as workers in the bottom fifth of the wage distribution in each survey year). In 2010, over 38 percent of low-wage workers lacked health insurance from any source, up from 16 percent in 1979. The biggest reason for the decline in coverage is the erosion of employer-provided health insurance, either through a worker's own employer or as a dependent on another family member's employer-provided policy. Over the last three decades, the role of public insurance in providing coverage for low-wage workers has increased, though not nearly enough to offset the declines in private insurance. In 2010, about 10 percent of low-wage workers had coverage through Medicaid, double the share in 1979. While a great deal of uncertainty still surrounds the Affordable Care Act (ACA) and its likely impact on employers and workers, reasonable estimates based on consensus projections suggest that the ACA will have a substantial positive effect on health-insurance coverage rates for low-wage workers. Even so, the ACA will likely leave an important share of low-wage workers, especially low-wage Latino, African American, and Asian workers, as well as many immigrant workers, without coverage. At the same time, if the ACA is blocked – in the courts or in Congress – there is every indication that coverage rates for low-wage workers will continue their long, steady decline.
    Keywords: low-wage work, health insurance
    JEL: J I I1 I18
    Date: 2012–02
  3. By: Bernard Shull
    Abstract: Government forbearance, support, and bailouts of banks and other financial institutions deemed "too big to fail" (TBTF) are widely recognized as encouraging large companies to take excessive risk, placing smaller ones at a competitive disadvantage and influencing banks in general to grow inefficiently to a "protected" size and complexity. During periods of financial stress, with bailouts under way, government officials have promised "never again." During periods of financial stability and economic growth, they have sanctioned large-bank growth by merger and ignored the ongoing competitive imbalance. Repeated efforts to do away with TBTF practices over the last several decades have been unsuccessful. Congress has typically found the underlying problem to be inadequate regulation and/or supervision that has permitted important financial companies to undertake excessive risk. It has responded by strengthening regulation and supervision. Others have located the underlying problem in inadequate regulators, suggesting the need for modifying the incentives that motivate their behavior. A third explanation is that TBTF practices reflect the government's perception that large financial firms serve a public interest-they constitute a "national resource" to be preserved. In this case, a structural solution would be necessary. Breakups of the largest financial firms would distribute the "public interest" among a larger group than the handful that currently hold a disproportionate concentration of financial resources. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 constitutes the most recent effort to eliminate TBTF practices. Its principal focus is on the extension and augmentation of regulation and supervision, which it envisions as preventing excessive risk taking by large financial companies; Congress has again found the cause for TBTF practices in the inadequacy of regulation and supervision. There is no indication that Congress has given any credence to the contention that regulatory motivations have been at fault. Finally, Dodd-Frank eschews a structural solution, leaving the largest financial companies intact and bank regulatory agencies still with extensive discretion in passing on large bank mergers. As a result, the elimination of TBTF will remain problematic for years to come.
    Keywords: Too Big to Fail; Banking Policy; Antitrust; Government Policy; Regulation
    JEL: G21 G28
    Date: 2012–02
  4. By: Fikret Adaman; Yahya M. Madra
    Date: 2012–04
  5. By: Robert Dubois
    Abstract: Not since the Great Depression have monetary policy matters and institutions weighed so heavily in commercial, financial, and political arenas. Apart from the eurozone crisis and global monetary policy issues, for nearly two years all else has counted for little more than noise on a relative risk basis. In major developed economies, a hypermature secular decline in interest rates is pancaking against a hard, roughly zero lower-rate bound (i.e., barring imposition of rather extreme policies such as a tax on cash holdings, which could conceivably drive rates deeply negative). Relentlessly mounting aggregate debt loads are rendering monetary- and fiscal policy-impaired governments and segments of society insolvent and struggling to escape liquidity quicksands and stubbornly low or negative growth and employment trends. At the center of the current crisis is the European Monetary Union (EMU)-a monetary union lacking fiscal and political integration. Such partial integration limits policy alternatives relative to either full federal integration of member-states or no integration at all. As we have witnessed since spring 2008, this operationally constrained middle ground progressively magnifies economic divergence and political and social discord across member-states. Given the scale and scope of the eurozone crisis, policy and actions taken (or not taken) by the European Central Bank (ECB) meaningfully impact markets large and small, and ripple with force through every major monetary policy domain. History, for the moment, has rendered the ECB the world's most important monetary policy pivot point. Since November 2011, the ECB has taken on an arguably activist liquidity-provider role relative to private banks (and, in some important measure, indirectly to sovereigns) while maintaining its long-held post as rhetorical promoter of staunch fiscal discipline relative to sovereignty-encased "peripheral" states lacking full monetary and fiscal integration. In December 2011, the ECB made clear its intention to inject massive liquidity when faced with crises of scale in future. Already demonstratively disposed toward easing due to conditions on their respective domestic fronts, other major central banks have mobilized since the third quarter of 2011. The collective global central banking policy posture has thus become more homogenized, synchronized, and directionally clear than at any time since early 2009.
    Keywords: Eurozone; Monetary Policy; Fiscal Policy; European Central Bank; European Monetary Union; Debt Monetization; Euro; Basel; Sovereign Debt; Credit Default Swaps; Liquidity; Solvency; Deleveraging; LTRO
    JEL: E02 E31 E42 E44 E51 E52 E58 E61 E62 E63 F36 H63
    Date: 2012–03
  6. By: Rendahl, P.
    Abstract: This paper argues that the effectiveness of fiscal policy may increase markedly during periods of low nominal interest rates and high, persistent, unemployment. An increase in government spending boosts economic activity and reduces the unemployment rate both in the present and in the future. As a less disconcerting future spurs a rise in private consumption, unemployment falls even further and triggers an additional rise in private demand, and so on. In a stylized model, I show that the marginal impact of government spending on output is equal to the reciprocal of the elasticity of intertemporal substitution. In a more realistic framework, the effect is somewhat attenuated and displays significant nonlinearities with respect to the depth of the crisis as well as the size of the stimulus package. But in a severe recession with an unemployment rate of eight percent or above, the fiscal multiplier is equal to 1.5.
    Keywords: Fiscal multiplier; Fiscal policy; Liquidity trap; Unemployment inertia
    JEL: E24 E60 E62 H12 H30 J23 J64
    Date: 2012–02–28
  7. By: Rathin Roy (International Policy Centre for Inclusive Growth); Raquel Almeida Ramos (IPC-IG)
    Abstract: When the International Monetary Fund (IMF) was created, its purpose was to support the new system of fixed exchange rate regimes. With the breakdown of the par-value system, its article on exchange-rate arrangements?Article IV?had to be revised. Per the revised version, the IMF would annually write reports on countries? economic situation and provide policy recommendations. (?)
    Keywords: Has IMF Advice Changed After the Crisis?
    Date: 2012–02
  8. By: Howes, Stephen (Asian Development Bank Institute); Wyrwoll, Paul (Asian Development Bank Institute)
    Abstract: The developing economies of Asia are confronted by serious environmental problems that threaten to undermine future growth, food security, and regional stability. This study considers four major environmental challenges that policymakers across developing Asia will need to address towards 2030: water management, air pollution, deforestation and land degradation, and climate change. We argue that these challenges, each unique in their own way, all exhibit the characteristics of “wicked problems”. As developed in the planning literature, and now applied much more broadly, wicked problems are dynamic, complex, encompass many issues and stakeholders, and evade straightforward, lasting solutions.
    Keywords: asia environmental problems; food security; water management; air pollution; deforestation; land degradation; climate change; wicked problems
    JEL: O10 O44 O53 Q28 Q53 Q56 Q58
    Date: 2012–03–01
  9. By: Dellepiane-Avellaneda, Sebastian
    Abstract: Douglass North is a uniquely creative and inspiring social scientist. The impact of North’s ideas in the area development cooperation can hardly be overstated. By stressing the role of institutions, this scholar has immensely influenced development thinking and practice, providing intellectual underpinnings to the dominant good governance paradigm. North’s landmark Institutions, Institutional Change and Economic Performance is one of the most cited books in the social sciences. This paper contends, however, that North’s ideas are widely cited, but not always properly understood. Moreover, some of his core arguments have been overlooked, ignored, or misrepresented, not least by the aid community. This paper provides a systematic assessment of the content and evolution of North’s writings, from his pioneering works on property rights and institutions in the 1970s, to his recent scholarship on beliefs and political violence. The focus is on identifying the key analytical problems and remaining challenges of the institutional approach to development. The paper also takes issue with the inconsistencies and policy gaps of the good governance consensus. In doing so, it also reflects upon the future of the research program on institutions and development. Would the renewed emphasis on politics, conflict, inequality, and context lead to an improved governance agenda or to a shift towards a post-institutionalist paradigm?
    Date: 2012–01
  10. By: Nawaz, Saima
    Abstract: The objective of this study is to analyze the impact of institutions on the economic growth and examine whether the ultimate impact differs at various stages of development among 24 Asian countries over the period 1996-2008 using a dynamic panel data analysis model based on the SYS-GMM estimation procedure. The overall analysis of this study shows that institutions indeed are important in determining the long-run economic growth. However, the impact of the institutions on economic growth varies across the regions and depends upon the existence level of development. This study concludes that the institutions are more effective in developed region as compared to developing region. More specially, control over corruption, rule of law and regulatory quality are highly effective in promoting long rum economic growth in East Asia than South Asia. Different countries require different set of institutions to promote long run economic growth.
    Keywords: Institutions; Economic Growth; Stages of Development
    JEL: E02 O43
    Date: 2011–12–01

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