nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒06‒07
six papers chosen by
Karl Petrick
Western New England University

  1. "What Do We Know About the Labor Share and the Profit Share? Part III: Measures and Structural Factors" By Olivier Giovannoni
  2. "Dead Economic Dogmas Trump Recovery: The Continuing Crisis in the Eurozone Periphery" By C. J. Polychroniou
  3. "Income Distribution Macroeconomics" By Olivier Giovannoni
  4. "The Great Recession and Unpaid Work Time in the United States: Does Poverty Matter?" By Tamar Khitarishvili; Kijong Kim
  5. Macro Micro Model with a Post-Keynesian Perspective in the banking industry By Hyejin Cho
  6. "A Sustainable Monetary Framework for an Independent Scotland" By Philip Pilkington

  1. By: Olivier Giovannoni
    Abstract: Economic theory frequently assumes constant factor shares and often treats the topic as secondary. We will show that this is a mistake by deriving the first high-frequency measure of the US labor share for the whole economy. We find that the labor share has held remarkably steady indeed, but that the quasi-stability masks a sizable composition effect that is detrimental to labor. The wage component is falling fast and the stability is achieved by an increasing share of benefits and top incomes. Using NIPA and Piketty-Saez top-income data, we estimate that the US bottom 99 percent labor share has fallen 15 points since 1980. This amounts to a transfer of $1.8 trillion from labor to capital in 2012 alone and brings the US labor share to its 1920s level. The trend is similar in Europe and Japan. The decrease is even larger when the CPI is used instead of the GDP deflator in the calculation of the labor share.
    Keywords: Labor Share; Composition Effect; Income Inequality; Top Incomes; Purchasing Power
    JEL: D33 E24 E25
    Date: 2014–05
  2. By: C. J. Polychroniou
    Abstract: The "happy talk" emanating from eurozone officials regarding the economic crises in the periphery deserves some vigorous pushback. Focusing on the four bailed-out countries of Greece, Ireland, Portugal, and Spain, Research Associate and Policy Fellow C. J. Polychroniou argues in this policy brief that, contrary to the burgeoning optimism in official communications, these countries' economies are still not on track for vigorous, sustainable recoveries in growth and employment--and that there is nothing surprising in this result.
    Date: 2014–05
  3. By: Olivier Giovannoni
    Abstract: Recent research stresses the macroeconomic dimension of income distribution, but no theory has yet emerged. In this note, we introduce factor shares into popular growth models to gain insights into the macroeconomic effects of income distribution. The cost of modifying existing models is low compared to the benefits. We find, analytically, that (1) the multiplier is equal to the inverse of the labor share and is about 1.4; (2) income distribution matters mostly in the medium run; (3) output is wage led in the short run, i.e., as long as unemployment persists; (4) capacity expansion is profit led in the full-employment long run, but this is temporary and unstable.
    Keywords: Economic Growth; Income Distribution; Multiplier; Factor Share; Output Capacity; Instability
    JEL: D33 E25
    Date: 2014–06
  4. By: Tamar Khitarishvili; Kijong Kim
    Abstract: In times of economic crises, household production, and the unpaid work time associated with it, can serve as a coping mechanism for absorbing the impact of shocks. Evidence from the Great Recession has been supportive of this possibility, and has revealed the presence of gender asymmetries stemming from men having experienced disproportionately high job losses. In this paper, we further examine the presence of poverty-based asymmetries in the unpaid work time changes of men and women given that the role of household production as a coping mechanism may vary by poverty status. We use the 2003-12 American Time Use Survey and conduct the Oaxaca Blinder decompositions of the changes in the unpaid work time along the business cycle. Our findings reveal that the changes in men's and women's unpaid work time indeed varied by poverty status. In particular, the reduction in women's unpaid work time was driven by nonpoor women. Among men, the lack of the change masked the increase in poor men's unpaid work time and the decrease in nonpoor men's unpaid work time. The decomposition results indicate that, in addition to the shifts in own employment status, shifts in spousal employment status also played a considerable role in explaining the gender differences in unpaid work time changes. In turn, varied shifts in the household structure were important drivers of the poverty-based differences in the unpaid work time changes. Furthermore, the forces underlying the changes in unpaid work time were not limited to the shifts in individual and household characteristics, as the portion of the unpaid work time changes unexplained by these characteristics remained sizable. This finding supports the hypothesis of poverty-based variation in unpaid work time adjustments in that, even without shifts in characteristics, poor and nonpoor individuals appeared to have responded to the recession in different ways.
    Keywords: Time Use; Household Production; Poverty; Gender; Great Recession
    JEL: J22 D13 I32 J16
    Date: 2014–05
  5. By: Hyejin Cho (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This article introduces the cascaded individual model of Post-keynesian economics. This differs from the representative agent model of the old-keynesian model mathematically and methodologically. The model builds from five assumptions containing original concepts: cascaded individuals, a social planner vs a regulator, aggregate deposits (stock) vs pyroclastic deposits (flow). Mainly, this Macro-Micro approach of Post-keynesian concepts suggests the regulation of the money flow. Then, this paper articulates fundamental concepts to solve problems of a sudden "micro" financial shock in the short run with the long run "macro" stabilization with a balanced perspective between macroeconomics and microeconomics.
    Keywords: macro micro model; Post-keynesian; banking industry; general equilibrium; endogenous money creation; representative agents; cascaded individuals; aggregate deposits; pyroclastic deposits; social planner; regulator; moral hazard problem
    Date: 2014–05–22
  6. By: Philip Pilkington
    Abstract: This September, voters in Scotland will decide whether to break away from the United Kingdom. If supporters of independence carry the day, pivotal choices that affect the scope of Scotland's economic sovereignty and its future relationship to the UK will need to be made, particularly with respect to the question of its currency. As the disaster in the eurozone makes clear, it is essential to get these arrangements right. In this policy brief, Philip Pilkington outlines a monetary framework designed to meet the macroeconomic challenges that would be faced by a newly separate Scotland. His conclusion: while it would be in Scotland's best interests to continue using the sterling in the short run, making the transition to issuing its own, freely floating currency would place the country on a more stable economic footing.
    Date: 2014–06

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