nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒07‒13
eight papers chosen by
Karl Petrick
Western New England University

  1. A Kaleckian Model with Intermediate Goods By Kemp-Benedict, Eric
  2. Moving to Greener Societies: Moral Motivation and Green Behaviour. By Lorenzo Cerda Planas
  3. Unions and income inequality: a heterogenous cointegration and causality analysis By Herzer, Dierk
  4. Behavioural Labour Economics: Advances and Future Directions By Dohmen, Thomas
  5. Capitalism in Green Disguise: The Political Economy of Organic Farming in the European Union By Charalampos Konstantinidis
  6. Kant’s Endogenous Growth Mechanism By Gabriel Fagan; Vito Gaspar; Peter McAdam
  7. Sir W. Arthur Lewis and the Africans: Overlooked Economic Growth Lessons By Amavilah, Voxi Heinrich
  8. Mainstream Aversion to Economic Methodology and the Scientific Ideal of Physics By Drakopoulos, Stavros A.

  1. By: Kemp-Benedict, Eric
    Abstract: Kaleckian models are widely used for macroeconomic analysis due to their flexibility and simplicity. Sraffians counter that the Kaleckian model fails to capture a central fact of modern economies, the existence and importance of intermediate consumption. The critique is correct, but as the remedy appears to be a detailed analysis with multi-sectoral input-output tables, Sraffian models have not displaced their more tractable Kaleckian counterparts. This paper presents a model with intermediate consumption that is Kaleckian in spirit, although prompted by the Sraffian critique. It is shown that the profit share of GDP can be decomposed into two factors, an average profit share at firm level and a factor capturing intermediate goods consumption. The corresponding firm-level markups for a sample of fourteen OECD countries cluster closely around a common value that remains steady when averaged over business cycles. Taking this as evidence that the factorization is empirically meaningful, the paper then constructs a modified Kaleckian model. Using the modified model it is shown that economies are always profit-led with respect to a change in intermediate consumption, but may be either profit-led or wage-led with respect to a change in the firm-level markup, opening the possibility for diverse trajectories over business cycles. The model is applied to France, which has a particularly long data series, and is shown to perform well in explaining changes in utilization rates.
    Keywords: Kaleckian; Sraffian; intermediate consumption; business cycles
    JEL: E11 E12 E32
    Date: 2014–05–30
  2. By: Lorenzo Cerda Planas (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This paper intends to provide an alternative explanation of why societies behave differently from an environmental point of view. To do so, I use a Kantian moral approach at a microeconomic level. Under this premise, I show that two identical societies (according to income and political system) might follow different paths with respect to their "green" behaviour. Additionally, I identify tipping points that could nudge a society from a polluting behaviour to a green one. I find that environmental perception as well as how governments are elected can be important factors in this shift.
    Keywords: Environmental motivation, Kantian morale, green behaviour, tipping points.
    JEL: Q50 D64 H41 C62
    Date: 2014–01
  3. By: Herzer, Dierk (Helmut Schmidt University, Hamburg)
    Abstract: Although a large body of research has examined the effects of unions on the wage distribution, surprisingly little attention has been devoted to the effects of unions on the distribution of income. This paper examines the long-run relationship between unionization and income inequality for a sample of 20 countries. Using heterogeneous panel cointegration techniques, we find that (i) unions have, on average, a negative long-run effect on income inequality, (ii) there is considerable heterogeneity in the effects of unionization on income inequality across countries (in about a third of cases the effect is positive), and (iii) long-run causality runs in both directions, suggesting that, on average, an increase in unionization reduces income inequality and that, in turn, higher inequality leads to lower unionization rates.
    Keywords: unions; income inequality; cross-country heterogeneity; causality; panel cointegration
    JEL: C23 D31 J51
    Date: 2014–07–03
  4. By: Dohmen, Thomas (University of Bonn)
    Abstract: In the past decades, behavioural economics has become an influential and important field of economics. Interest in behavioural economics derives from unease with standard economic models that are based on restrictive assumptions, which confine the nature of human motivation. Although Adam Smith, the founding father of modern economics, had highlighted the multitude of psychological motives that drive human behaviour, and despite the fact that many influential economists thereafter believed in tenets of modern behavioural economics, the homo economicus assumption became prevalent, until this construct was challenged by compelling evidence on social, cognitive and emotional factors that drive decision-making and social interaction. Since human interaction is germane to labour markets, one would expect behavioural economics to be highly relevant for labour economics. This paper gauges whether and how behavioural economics has left its mark on labour economics, considers the timing and structure of this development, and contemplates its future impact on labour economics.
    Keywords: behavioural economics, labour economics, behavioural labour economics
    JEL: J00 J01 D03
    Date: 2014–06
  5. By: Charalampos Konstantinidis
    Abstract: Organic farming is often presented as the success story of Rural Development policies in the European Union, having grown from a marginal activity to one covering more than 5% of European agricultural land. Even though organic farming is often thought of as small-scale farming, I show that organic farms in Europe display characteristics associated with capitalist agriculture. Organic farms are larger and more mechanized than conventional farms. Furthermore, organic farms are associated with wage-labor and use less labor per hectare than their conventional counterparts, casting doubt on the efficacy of organic farming in increasing labor demand in marginalized communities and acting as an effective tool for keeping rural residents in the countryside. These results present us with evidence of the “conventionalization†of organic farming, and with a significant case of “green-washing†of capitalist structures of production.
    Keywords: political economy, organic farming, agriculture, European Union
    JEL: B5 O13 P16 Q18
    Date: 2014–01
  6. By: Gabriel Fagan (European Central Bank); Vito Gaspar (International Monetary Fund); Peter McAdam (European Central Bank and University of Surrey)
    Abstract: Despite the modern origins of endogenous growth theory, we argue that the ‘Idea for a Universal History with a Cosmopolitan Aim’ written by Immanuel Kant in 1784 provides an early and coherent example of such a theory. Kant’s endogenous growth mechanism is driven by the inherent rivalry that exists between agents which increases effort and strengthens the accumulation of knowledge, which in turn is carried through generations. In an exercise in rational reconstruction, we present a mathematical model of Kant’s mechanism. We use the model to contribute to the contemporary policy debate as to whether “keeping up with the Joneses†leads to excessive effort.
    JEL: A12 B3 N0 O38 O40 P1
    Date: 2014–06
  7. By: Amavilah, Voxi Heinrich
    Abstract: This comment is not a typical outcome of a typical research activity, and it not written like one. For example, although I have a list of references, I do not provide a formal literature review. The list is simply an acknowledge of the work that might have influenced my thoughts on the topic at hand. It is also not a review or any other evaluation of Lewis’s work, of which there are many by more eminent and famous friends, colleagues, and students of his. Lewis’s impact on Development Economics is well-known and appreciated. Less known and openly appreciated is his economic theory of growth and technological change, but I am not going to stress that either. My maintained claim is that the Newly-Industrialized Asian economies (NIAEs) have read carefully and followed closely and well Lewis’s theory in devising their growth and change strategies and policies, with local adjustments, of course. Many African countries on the other hand appear to have followed Lewis halfheartedly and in a helter-skelter way. Consequently, the difference in the performance of the two regions is no longer a matter of contention. The objective of this comment is to restate what I believe are Lewis’s key lessons to developing countries, and to show that although Lewis led all developing countries to water, proverbially speaking, some African countries have so far chosen not to drink. I find that there is a deliberateness in the order of the development process as conceptualized in Lewis’s theory of economic growth and technological change. First, for a country to grow it has to acknowledge that scarcity is real and to learn to be efficient, to economize. Second, efficiency requires good economic institutions to sustain it. Third, institutions need to not only have knowledge, defined as technological knowledge plus social knowledge, but more importantly such knowledge must grow, spread, and be used. The fourth “proximate cause” of growth in this order of preference is physical capital. Following capital, in the fifth and sixth places, respectively, are population (labor) and other natural resources (land), and government. Lewis is new classical (not to be confused with neo-classical) in that his theory of growth and change takes population and natural resources as given for any developing country, and counts government as a throwback to classical economics to suggest that economies perform best when government’s role is well defined and constrained. By implication good government is a function of good institutions, learning and knowledge growth. I conclude from this evidence that some African countries have refused to acknowledge scarcity, paid lip-service to knowledge accumulation, growth, and diffusion, over-stressed their need for physical capital and the abundance of their natural resources, neglected their populations, and failed to assign government its proper role. The result, until recently, has been slow growth.
    Keywords: Economic growth and technological change, Lewis and the Africans, Lewis and growth and change of African countries, lessons for growth and change, deep causes of growth and change of developing countries
    JEL: O11 O33 O47 O55 P52
    Date: 2014–07–05
  8. By: Drakopoulos, Stavros A.
    Abstract: There is a persistent aversion towards methodological discourse by most mainstream economists. Frank Hahn (1992) exemplified this attitude and provoked a number of reactions concerning the role and the reasons for methodological aversion. After offering a categorization of the main explanations for methodological aversion, the paper suggests an explanation that is based on the role of the physics scientific ideal. It argues that the strive to achieve the high scientific status of physics by following the methods of physics, contributed to the negative mainstream attitude towards economic methodology. This can be reinforced by examining the writings of extremely influential mainstream economists such as Irwin Fisher and Milton Friedman. These works clearly imply that the hard science status of economics renders methodological discussions and especially methodological criticism, rather pointless. Given that the existing prescriptions for making economic methodology more attractive do not give much thought to this important aspect of mainstream economics, the paper also argues for a more systematic discussion of this issue.
    Keywords: Economic Methodology; History of Economic Thought; Economics and Physics.
    JEL: B0 B3 B4
    Date: 2014–07

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