nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒10‒17
fourteen papers chosen by
Karl Petrick
Western New England University

  1. The Structure of the Models of Structural Change and Kaldor's Facts: A Critical Survey By KUROSE, Kazuhiro
  2. Michael Polanyi's Economics: A Strange Rapprochement By Agnès Festré; Pierre Garrouste
  3. Optimal Bank Recovery By C. A. E. Goodhart; Miguel A. Segoviano Basurto
  4. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution" By Jorg Bibow
  6. The (dis-)embedded firm: Complex structure and dynamics in inter-firm relations. Adding institutionalization as a Veblenian dimension to the Coase-Williamson approach – An emerging triangular organizational space By Elsner, Wolfram; Schwardt, Henning
  7. Financial Instability, Cycles and the Role of Institutions By Iancu, Aurel
  8. Economía y ciencias sociales: reporte de investigación By Estrada, Fernando
  9. L'histoire (faussement) naïve des modèles DSGE By Francesco Sergi
  10. The Contexts of Social Inclusion By Hilary Silver
  11. The Hidden Cost of Globalization: Import Competition and Mental Distress By Colantone, Italo; Crinò, Rosario; Ogliari, Laura
  12. Philanthropy, Welfare Capitalism or Radically Different Global Economic Model: What Would It Take to End Global Poverty within a Generation Based on Historical Growth Patterns? - Working Paper 413 By Peter Edward, Andy Sumner
  13. UNU-MERIT at 25 years : how doctoral training at UNU-MERIT contributes to the community of scholars in the economis of innovation? By Akcomak S.; Garcia A.; Santiago-Rodriguez F.
  14. Capital In the 21st Century: A Review By malikane, christopher

  1. By: KUROSE, Kazuhiro
    Abstract: Although structural analysis was one of the central subjects in economics, its importance fell by the wayside, especially after aggregate macroeconomic growth models became popular in the 20th century. However, structural analysis has been revived recently and a new research agenda has emerged: to examine whether structural change can be reconciled with Kaldor's facts. This is an interesting agenda from both the theoretical and empirical point of view. Since Kaldor's facts are thought of as a sort of balanced growth path, this concept is extended so as to reconcile structural change with Kaldor's facts. In this study, we review the multi-sectoral models in which structural change can be reconciled with Kaldor's facts. We demonstrate that the common feature of all reviewed multi-sectoral models of structural change is that they are regarded as natural extensions of the one-sector model of growth and then somehow transformed into the one-sector model. However, we assert that it is not an adequate treatment of multi-sectoral models when structural change is focused. The transformation of multi-sectoral models into the one-sector model assumes a homogeneous capital but capital consists of heterogeneous commodities in modern capitalist economies. It reminds us of the lessen of the Cambridge capital controversies that the properties obtained by the one-sector model do not necessarily hold in multi-sectoral models when capital consists of heterogeneous commodities and the choice of techniques is allowed. From the empirical point of view, it is one of the important characteristics that the change in the composition of physical capital is systematically related to income growth. However, the models in which only homogeneous capital is included cannot focus on the characteristic. Whether or not structural change can be reconciled with Kaldor's facts in the models with heterogeneous capital is still an open question.
    Keywords: structural change, Kaldor's facts, balanced growth path, Cambridge capital controversies, heterogeneous capital
    JEL: B24 E12 O14 O41
    Date: 2015–10–05
  2. By: Agnès Festré (GREDEG CNRS; University of Nice Sophia Antipolis); Pierre Garrouste (GREDEG CNRS; University of Nice Sophia Antipolis)
    Keywords: Michael Polanyi, Hayek, Keynes, spontaneous order, State intervention, liberalism, evolutionism
    JEL: B25 B31 B41
    Date: 2015–10
  3. By: C. A. E. Goodhart; Miguel A. Segoviano Basurto
    Abstract: Banks’ living wills involve both recovery and resolution. Since it may not always be clear when recovery plans or actions should be triggered, there is a role for an objective metric to trigger recovery. We outline how such a metric could be constructed meeting criteria of (i) adequate loss absorption; (ii) distinguishing between weak and sound banks; (iii) little susceptibility to manipulation; (iv) timeliness; (v) scalable from the individual bank to the system. We show how this would have worked in the U.K., during 2007–11. This approach has the added advantage that it could be extended to encompass a whole ladder of sanctions of increasing severity as capital erodes.
    Keywords: Bank resolution;Banks;Bank supervision;Bank Recovery, Bank Resolution, Metrics for Triggers, Loss Absorption, Probability of Distress, Loan Default.
    Date: 2015–09–30
  4. By: Jorg Bibow
    Abstract: This study assesses the European Central Bank's (ECB) crisis management performance and potential for crisis resolution. The study investigates the institutional and functional constraints that delineate the ECB's scope for policy action under crisis conditions, and how the bank has actually used its leeway since 2007--or might do so in the future. The study finds that the ECB may well stand out positively when compared to other important euro-area or national authorities involved in managing the euro crisis, but that in general the bank did "too little, too late" to prevent the euro area from slipping into recession and protracted stagnation. The study also finds that expectations regarding the ECB's latest policy initiatives may be excessively optimistic, and that proposals featuring the central bank as the euro's savior through even more radical employment of its balance sheet are misplaced hopes. Ultimately, the euro's travails can only be ended and the euro crisis resolved by shifting the emphasis toward fiscal policy; specifically, by partnering the ECB with a "Euro Treasury" that would serve as a vehicle for the central funding of public investment through the issuance of common Euro Treasury debt securities.
    Keywords: Monetary Policy, Currency Union, ECB, Lender of Last Resort, Euro Crisis, Banking Union
    JEL: E42 E44 E52 E58 E61
    Date: 2015–09
  5. By: Wuepper, David; Sauer, Johannes
    Abstract: We investigate whether colonial experiences in the Gold Coast still affect the performance of agribusiness in Ghana today. To this end, we surveyed 400 pineapple farmers in Ghana and connected this new dataset to data on the locations of Christian missionary schools and the performance of colonial cocoa cooperatives, from the first half of the 20th century. We find an effect of both historical variables on the performance of contract farming. The causal channel is a persistent change in culture: the performance of the colonial cocoa cooperatives changed peoples’ belief in their own capabilities to achieve business success (self-efficacy). The Christian missionary schools, in contrast, are found to have reduced village social capital.
    Keywords: Contract-Farming, Rural Development, Cultural Evolution, Self-Efficacy, Social Capital, Agribusiness, Community/Rural/Urban Development, Institutional and Behavioral Economics,
    Date: 2015
  6. By: Elsner, Wolfram; Schwardt, Henning
    Abstract: The increasing complexity of the environment of firms, of strategic interaction, and emergent informal institutional network cooperation, seems to outreach the traditional Coase-Williamson transaction-cost framework with its market-hierarchy dichotomy. We propose to take the complexity of nowadays’ firm ecologies more serious and integrate an institutional dimension to enhance the analysis of real-world organizational forms and the theory of the firm. This institutional dimension is conceptualized as an “OIE” (Veblenian) “institutional dichotomy” that ranges between “instrumental” cooperative networking and “ceremonial encapsulation” (lock-in). Thus, a more comprehensive two-dimensional, particularly triangular, organizational space is drafted, which can better map the numerous and diverse forms of production and innovation systems, including their emergence as spatial clusters and corporate networks. The additional dimension integrates institutionalized network cooperation as “instrumental problem-solving”, vs. power and status seeking (by both large hierarchies and fiercely rivalling market participants) as “ceremonial dominance”. In addition to ideal market and hierarchy, it provides the ideal solution of institutionalized network cooperation, learned in recurrent social-dilemma problems, as a third vanishing point and corner. The resulting Organizational Triangle is considered a heuristic for inter-firm organizational research. As a check of its usefulness, this device is applied to recent developments in the global corporate economy.
    Keywords: Theory of the firm; direct interdependence/strategic interaction; institutional emergence/institutionalized cooperation; Coase/Williamson; embeddedness; Veblenian institutional dichotomy; instrumental/ceremonial institutional aspects; spatial clusters/firm networks; open innovation; organizational triangle
    JEL: B52 D02 D23 D85 L14
    Date: 2015–10–12
  7. By: Iancu, Aurel
    Abstract: In this study I review the main scientific contributions of Minsky and other scholars to the financial instability and crisis issues, and the role of institutions in modeling the medium and long financial and business waves. The topics developed in this paper are the following: the relationships between financial instability, financial and business crisis and institutions; the thwarting of the explosive instability by the specific institutions’ actions and regulations; the impact of the institutional changes on the financial and business cycles; an empiric approach to the financial and business cycles and their synchronization in the Central and Eastern European countries/ members of the EU, taking into account the main characteristics of the changes in these countries’ institutions.
    Keywords: financial instability, business cycles, financial cycles, institutions, long waves, basic cycles, supercycles, Central and Eastern European countries
    JEL: B52 B52 D53 G01 G2 L51 P11 P21 P31
    Date: 2014–10
  8. By: Estrada, Fernando
    Abstract: The theoretical economy is diverse and contains frameworks and models of different research. This article proposes a body of recognized theories and methods, not only for the so-called mainstream, but more heterodox approaches. In addition to paying attention to currents and authors who have analyzed the economy from an epistemological point of view. A selective picture that also corresponds to the research conducted by the author and his exploration of methods of integrated social science analysis is offered. In short, frameworks and contents of the article are mainly the nature of a research report.
    Keywords: Methods, Models, Paradigms, Microeconomics, Macroeconomics
    JEL: B00 B1 B15 B4 B41 B5 B52
    Date: 2015
  9. By: Francesco Sergi (Centre d'Economie de la Sorbonne)
    Abstract: The purpose of the article is to analyze and criticize the way how DSGE macroeconomists working in policy-making institutions think about the history of their own modeling practice. Our contribution is, first of all, historiographical: it investigates an original literature, emphasizing in the history of DSGE as it is told by its own practitioners. The results of this analysis is what we will call a “naïve history” of DSGE modeling. Modellers working from this perspective present their models as the achievement of a “scientific progress”, which is linear and cumulative both in macroeconomic theorizing and in the application of formalized methods and econometric techniques to the theory. This article also proposes a critical perspective about the naïve history of the DSGE models, which drawns, by contrast, the main lines of an alternative, “non-naïve” history. of the DSGE models is incomplete and imprecise. It mainly ignores controversies, failures and blind alleys in previous research; as a consequence, the major theoretical and empirical turning points are made invisible. The naïve history also provides an ahistorical account of assessment criteria for modeling (especially for evaluating empirical consistency), which hides the underlying methodological and epistemological debates. Finally, we will claim that the naïve history plays an active and rhetoric role in legitimizing the DSGE models as a dominant tool for policy expertise
    Keywords: DSGE; new neoclassical synthesis, history of macroeconomics, modelling methodology, central banks, rhetoric of economics
    JEL: B22 B41 E60
    Date: 2015–09
  10. By: Hilary Silver
    Abstract: In light of the emphasis on “inclusion” in the Sustainable Development Goals (SDGs), this paper contends that social exclusion and inclusion are context-dependent concepts in at least three senses. First, the ideal of an inclusive society varies by country and by region. Second, different places have different histories, cultures, institutions and social structures. These influence the economic, social and political dimensions of social exclusion and the interplay among them. Third, context – where one lives – shapes access to resources and opportunities. Social inclusion is thus spatially uneven. The paper also shows how context matters, identifying some of the mechanisms by which nation-states and localities influence processes of economic, social, and political exclusion and inclusion.
    Keywords: Social inclusion, social exclusion, groups, inequality
    JEL: I31 I38 Z13
    Date: 2015–10
  11. By: Colantone, Italo; Crinò, Rosario; Ogliari, Laura
    Abstract: We study the effect of import competition on workers’ mental distress. To this purpose, we source information on the mental health of British workers from the British Household Panel Survey, and combine it with measures of import competition in more than 100 industries over 2001-2007. We find an increase in import competition to have a positive, statistically significant, and large impact on mental distress. The effect is strikingly robust to controlling for a wide range of individual, household, and industry characteristics. We show that part of the effect is due to import competition worsening the current labor market situation of individuals, in terms of higher probability of job displacement and lower wage growth. Additionally, and most importantly, we show that import competition worsens mental health also for individuals witnessing no change in observable labor market conditions, by increasing stress on the job and worsening expectations about the future.
    Keywords: Individual-level panel data; Subjective well-being; Trade adjustment costs
    JEL: F1
    Date: 2015–10
  12. By: Peter Edward, Andy Sumner
    Abstract: This paper considers the effectiveness and efficiency of global growth, as a route to poverty reduction, since 1990 and then demonstrates the redistributive challenges implicit in various poverty lines and scenarios: the significance being that this historical data can inform understanding and appreciation of what it would involve to end global poverty in the future. We find that a very modest redistribution of global growth could have ended poverty already at the lowest poverty lines. However, higher, but arguably more reasonable, poverty lines present radically different challenges to the current workings of national economic systems and to global (normative) obligations.
    Keywords: Poverty; Inequality, Distribution, Economic Growth
    JEL: D63 I32
    Date: 2015–09
  13. By: Akcomak S.; Garcia A.; Santiago-Rodriguez F. (UNU-MERIT)
    Abstract: This paper contributes to literature on the emergence of innovation studies as a scientific field. This area of research documents the mechanisms, interactions and meeting spaces that innovation scholars have developed to give substance and legitimacy to their work. What role is there for the training of young scholars in the development of this scientific field Based on a web survey of UNU-MERITs PhD alumni, we explore the ways in which doctoral training at a major research institute has contributed to the formation of young scholars in the broad field of innovation studies. In line with literature on the creation of science and technology human capital, we find that doctoral training grants PhD holders the technical knowledge and skills, together with the relational skills that sustain their membership and scholarly contributions to innovation studies. The evidence likewise suggests that the contribution of UNU-MERITs PhD programme on the building of innovation research capacities in developing countries is constrained by postgraduate decisions to stay in the developed world. Young scholars follow a career development strategy of linking to mentors and key senior researchers, while scientific interactions with fellow students are more limited. Social interactions tend to be more prominent for maintaining relations with the research community.
    Keywords: Network Formation and Analysis: Theory; Higher Education and Research Institutions; Technological Change; Research and Development; Intellectual Property Rights: General;
    JEL: D85 I23 O30
    Date: 2015
  14. By: malikane, christopher
    Abstract: This paper reviews Thomas Piketty's Capital in the Twenty-First Century. Piketty's Capital seeks to bring the issue of inequality back to the centre of social analysis and to encourage discussion about the evolution of wealth and inequality with a view to inform policy. The book uses data stretching as far back as the 1700's. The main thesis of the book is that capitalism automatically generates inequality and wealth concentration since the rate of return on capital always exceeds the growth rate of income. To resolve this problem, the book proposes a progressive tax on wealth and income. I show that Piketty's book is based on a misunderstanding of classical political economy, particularly Marx. Piketty's view of the development and phases of capitalism is inadequate. His tax proposals, though progressive, will not resolve the inequality problem. Lastly, his conclusion that modern economic growth made it possible to avoid the Marxist apocalypse is not borne out by his data.
    Keywords: Capital, inequality, wealth concentration, falling rate of profit.
    JEL: B12 B14 B16 B51 P1 P16 P26
    Date: 2015–10–09

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