nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒02‒23
fourteen papers chosen by
Karl Petrick
Western New England University

  1. Neoliberalism, trade imbalances and economic policy in the Eurozone crisis By Constantine, Collin; Reissl, Severin; Stockhammer, Engelbert
  2. Monopoly Capital and Capitalist Inequality: Marx after Piketty By Lambert, Thomas
  3. The crisis of finance-led capitalism in the United States of America By Evans, Trevor
  4. When more Flexibility Yields more Fragility: the Microfoundations of Keynesian Aggregate Unemployment By Giovanni Dosi; Marcelo C. Pereira; Andrea Roventini; Maria Enrica Virgillito
  5. Green jobs in the renewable energy sector By Bartniczak, Bartosz; Ptak, Michał
  6. A review of the economic theories of poverty By Miguel Sanchez-Martinez; Philip Davis
  7. New variables for vocational secondary schooling: Patterns around the world from 1950-2010 By Cathles, Alison
  8. Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality By Godechot, Olivier
  9. The World Bank: Why It Is Still Needed and Why It Still Disappoints - Working Paper 400 By Martin Ravallion
  10. The challenge of market power under globalization By David Arie Mayer-Foulkes
  11. Estimating Keynesian models of business fluctuations using Bayesian Maximum Likelihood By Christian Schoder
  12. A Comparative Study of Views and Role of Labor in Marxian, Mainstream and Islamic Economics By Shaikh, Salman Ahmed
  13. Financialisation and the Financial and Economic Crises: The Case of South Africa By Susan Newman
  14. Bangladesh’s Achievement in Poverty Reduction: The Role of Microfinance Revisited By Khandker, Shahidur R; Samad, Hussain A

  1. By: Constantine, Collin (Kingston University London); Reissl, Severin (Kingston University London); Stockhammer, Engelbert (Kingston University London)
    Abstract: This paper analyses the causes of the Eurozone crisis. In doing so it carefully surveys authors from different economic schools of thought. The paper discusses competing explanations for European current account imbalances. Remarkably, opposing views on the relative importance of cost developments and of demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics and there is a remarkable variability of policy conclusions. Regarding the assessment of fiscal and monetary policy there is a clearer polarisation, with heterodox analysis regarding austerity as unhelpful and most of orthodox economics endorsing it. We advocate a post-Keynesian view which holds that current account imbalances are not a fundamental cause of the sovereign debt crisis. Rather, the economic policy architecture of the Eurozone, which aims at restricting the role of fiscal and monetary policy, is the key to understanding the crisis in Europe.
    Keywords: Euro crisis; neoliberalism; European economic policy; financial crisis; sovereign debt crisis; current account balance
    JEL: B50 E60
    Date: 2016–02–17
  2. By: Lambert, Thomas
    Abstract: This paper proposes that one major explanation of growing inequality in the United States (US) is through the use of the concept of economic surplus. The economic surplus is a neo-Marxian term which combines the traditional Marxian tenet of surplus value with other ways that surplus value can be invested in a mature, advanced capitalist economy. A rising economic surplus that is not absorbed through growing consumer spending, luxury spending or government spending results in stagnant wages and growing inequality via higher levels of underemployment and greater monopoly and monopsony power among a decreasing number of huge, powerful corporations. Therefore, the politics surrounding the growth of inequality in the US has to be understood first by understanding over accumulation of the economic surplus by those at the top of the US capitalist class. This research note gives estimates of the rising economic surplus over the last several decades in the US as well as how these correlate with the level of inequality. The growth of the economic surplus gives rise and form to the politics of inequality and austerity. As time goes by, the politics of inequality and austerity in the US will be manifested by greater corporate influence in the political system, greater political polarization, less government effectiveness, and more debates about welfare spending, corporate taxation, taxes on upper income households, and taxes on wealth.
    Keywords: alienation, economics, fascism, inequality, monopoly capital, occupy movement, political science, socialism, tea party
    JEL: B51 B59
    Date: 2016–01
  3. By: Evans, Trevor
    Abstract: This study examines the development of the US economy since the prolonged recession in the early 1980s. This period was characterised by a serious weakening in the bargaining position of waged workers and a major expansion of the financial sector. Most of the economic gains accrued to top earners and economic growth became increasingly dependent on the expansion of credit. This precarious constellation led to short recessions in 1990 and again in 2001, but then in 2007 and 2008 the failure of highly complex securities led to the most serious financial crisis since 1929. The study reviews the development of profitability, income distribution and other key macroeconomic variables in the period leading up to, during and immediately after the crisis. It then identifies the main channels by which the crisis was transmitted form the US to other advanced capitalist economies and concludes with a brief review of the policy measures introduced by the US government in response to the crisis.
    Keywords: United States,finance-led capitalism,financial crisis
    JEL: E25 E32 E44 E58 F44 G01
    Date: 2015
  4. By: Giovanni Dosi; Marcelo C. Pereira; Andrea Roventini; Maria Enrica Virgillito
    Abstract: Wages are an element of cost crucially aecting the competitiveness of individual firms. But the wage bill is also a crucial element of aggregate demand. Hence it could be that more "flexible" and fluid labour markets, while allowing for faster inter-firm reallocation of labour, may also render the whole economic system more fragile, more prone to recession, more volatile. In this work we investigate some conditions under which such a conjecture applies. The paper presents an agent- based model that investigates the effects of two "archetypes of capitalism", in terms of regimes of labour governance - defined by the mechanisms of wage determination, firing, labour protection and productivity gains sharing - upon (i) labour market regularities and (ii) macroeconomic dynamics (long-term rates of growth, GDP uctuations, unemployment rates, inequality, etc..). The model is built upon the "Keynes meets Schumpeter" family of models (Dosi et al., 2010), explicitly incorporating different microfounded labour market regimes. Our results show that seemingly more rigid labour markets and labour relations are conducive to coordination successes with higher and smoother growth.
    Keywords: Involuntary Unemployment, Aggregate Demand, Wage Determination, Labour Market Regimes, Keynesian Coordination Failures, Agent-Based Models
    Date: 2016–02–18
  5. By: Bartniczak, Bartosz; Ptak, Michał
    Abstract: Green jobs exist for a long time. However, for some time dynamics of their creation is increasing and they are created in more and more sectors. Green jobs are created as a result of the development of new environmentally friendly technologies or through the "greening" of the next sectors of the economy. Despite the widespread use of the concept of green jobs there is a lack of a universally accepted definition of this concept and consequently can not be strictly defined sectors where these jobs are created. The purpose of this article is to present the situation related to the creation of green jobs in one of the fastest growing sectors in the world which is the renewable energy sector. The article analyzes the situation in selected countries, as well as in selected areas of renewable energy. The article presents also the support mechanisms that affect the development of the sector and thus to create jobs.
    Keywords: green jobs,renewable energy sector
    Date: 2015
  6. By: Miguel Sanchez-Martinez; Philip Davis
    Abstract: This paper critically analyses the views of poverty adopted by different economic schools of thought which are relevant to the UK, as well as eclectic theories focused on social exclusion and social capital. We contend that each of the economic approaches has an important contribution to make to the understanding of poverty but that no theory is sufficient in itself; a selective synthesis is needed. Furthermore, economics by its nature omits important aspects of the nature and causes of poverty.
    Date: 2014–04
  7. By: Cathles, Alison (UNU-MERIT, Maastricht University)
    Abstract: Projections in Europe and the United States suggest job vacancies will soon be concentrated in positions that require vocational training. This has spurred policy discussions about how vocational education can optimally complement or substitute for general education and highlighted the need to understand more precisely how the mix of skills in a workforce impacts economic growth. Macroeconomic growth literature has traditionally incorporated measures for human capital based on the length of time spent in educational institutions. The need to measure the skills acquired through different kinds of education has been appreciated. Specifically, the insights that might be obtained by comparing the macroeconomic growth of countries with different amounts of vocational education has been apparent, but the long-time series of internationally comparable data required has not been readily available. This paper fills this need by presenting consistent data on Vocational Secondary Schooling at five-year intervals from 1950-2010 for 129 countries. These data are constructed on the basis of existing UNESCO enrolment data and measures of secondary schooling from Barro and Lee. This paper describes both the methods used to construct the internationally comparable vocational secondary education variables and regional trends over the past 60 years. Separating education by type, vocational and general, is a first step toward better linking the educational purpose, at least in terms of workplace skill development, with economic results. The data are fully presented in the Annexes in tables (available here), so that they can be used by others to empirically investigate questions related to vocational education and economic growth.
    Keywords: Vocational Education, Education and Economic Development, Human Capital, Skills, Skill formation
    JEL: I25 J24
    Date: 2016–01–10
  8. By: Godechot, Olivier
    Abstract: In this paper, we study the impact of financialization on the rise in inequality in 18 OECD countries from 1970 to 2011 and measure the respective roles of various forms of financialization: the growth of the financial sector; the growth of one of its subcomponents, financial markets; the financialization of non-financial firms; and the financialization of households. We test these impacts using cross-country panel regressions in OECD countries. As dependent measures we use Solt's (2009) Gini index, the World Top Incomes Database, and OECD inter-decile inequality measures. We show first that the share of the finance sector within the GDP is a substantial driver of world inequality, explaining between 20 and 40 percent of its increase from 1980 to 2007. When we decompose this financial sector effect, we find that this evolution was mainly driven by the increase in the volume of stocks traded in national stock exchanges and by the volume of shares held as assets in banks' balance sheets. By contrast, the financialization of non-financial firms and of households does not play a substantial role. Based on this inequality test, we therefore interpret financialization as being mainly a phenomenon of marketization, redefined as the growing amount of social energy devoted to the trade of financial instruments on financial markets.
    Keywords: Financialization,Marketization,Income inequality,OECD
    Date: 2015
  9. By: Martin Ravallion
    Abstract: Do we still need the World Bank, given how much the global financial sector has expanded since the institution was founded? The paper argues that there is a continuing role for the Bank and that it is complementary to private finance. But fulfilling that role calls for a significant change in the Bank’s culture. Most fundamentally, knowledge must drive the Bank’s lending—both informing the nature of that lending and learning from it—rather than simply lending when called upon. The focus of knowledge generation should be on: (i) identifying and addressing the key country-specific constraints on rapid poverty reduction, and (ii) solving the cross-country coordination problems needed to deal with shared threats.
    Keywords: World Bank
    JEL: F35 G21 O19
    Date: 2015–04
  10. By: David Arie Mayer-Foulkes (Division of Economics, CIDE)
    Abstract: The legacy of Adam Smith leads to a false confidence on the optimality of laissez faire policies for the global market economy. Instead, the polarized character of current globalization deeply affects both developed and underdeveloped economies. Current globalization is characterized by factor exchange between economies of persistently unequal development. This implies the existence of persistent extraordinary market power in transnational corporations, reflected in their disproportionate participation in income and policy. These are shown to be steady state features of globalization in a convergence club model of development and underdevelopment including trade and FDI. Moreover, results in tax competition explain how the increased share of transnational profits under globalization leads to lower corporate taxes, more conservative policies, and weaker institutions for balancing market power. The increased level of market power under globalization poses a serious challenge for national and global governance that deeply impacts economic development, distribution, sustainability and democracy everywhere.
    Keywords: globalization, transnational corporations, underdevelopment, concentration, inequality, economic growth
    JEL: F02 F10 F23 O10
    Date: 2014–03
  11. By: Christian Schoder
    Abstract: An empirical approach to model estimation and evaluation based on Bayesian Maximum Likelihood is introduced to the post-Keynesian literature. To illustrate the method, it is applied to a neo-Kaleckian type of model of Euro Area business cycle fluctuations including endogenous fiscal and monetary policy as well as endogenous wage formation. To evaluate its empirical performance, the marginal likelihood and impulse-responses conditional on the proposed model are contrasted to those conditional on the corresponding Bayesian vector auto-regression models after relaxing the theory-implied cross-coefficient restrictions. The estimated parameter distributions are broadly in line with the empirical literature. Yet, a Bayesian vector auto-regression with loose theory-implied restrictions on the prior outperforms the neo-Kaleckian model considerably indicating misspecification. Further, a baseline Dynamic Stochastic General Equilibrium model is superior in terms of the marginal likelihood. Comparative impulse-response analysis indicates a failure of the neo-Kaleckian model to satisfyingly capture the fiscal and monetary policy transmission mechanisms.
    Keywords: Post-Keynesian economics, Bayesian Maximum Likelihood,Bayesian Vector Auto-Regression, model estimation, model evaluation
    JEL: E12 E32
    Date: 2016
  12. By: Shaikh, Salman Ahmed
    Abstract: In this paper, we comparatively analyze the views and role of labor in Marxian, mainstream and Islamic economics. We argue that Marxian view of labor undermines the role of entrepreneur. Indeed, the slave trade, industrialization and Colonialism resulted in exploitation of the labor. But, to correct matters, undermining the role of entrepreneur to the extent of abandoning private property rights is not the right solution either as it was also proved in the later part of the twentieth century. Nevertheless, mainstream economics too is unable to create an equitable balance between the capitalists and the labor class, especially in the presence of extractive institutions like interest based earnings on accumulated wealth and incapacitated wealth redistribution mechanisms. These extractive institutions perpetuate the dominance of wealthy capitalists by making their accumulated wealth immune to entrepreneurial risks. This also results in concentration of wealth, increase in income inequality and low levels of capital formation. Indeed, the recent evidence of jobless growth, high youth unemployment despite high per capita income and high income inequality supports this view. In Islamic economic framework, prohibition of interest encourages productive enterprise and capital formation. These factors boost the labor demanded by the firms. In the microeconomic decisions in consumption-leisure choice framework, Islamic institutions positively boost the labor supply. In an Islamic economy, wealth redistribution through Zakat and inheritance laws ensures circulation of wealth. Prohibition of interest closes the door for riskless non-labor income on money capital. This increases the cost of leisure and encourages the person to supply more labor and/or invest money capital in productive enterprise. Finally, we discuss the impact of Islamic work ethics on dealing with the problems of moral hazard, labor shirking and rigidity in the labor market due to efficiency wages and insider-outsider relationships.
    Keywords: Labor Economics, Labor Market, Labor Value, Marxian Economics, Islamic Economics, Wage Inequality
    JEL: J22 J23 J24 J31
    Date: 2015–04–04
  13. By: Susan Newman (University of West England, Bristol; University of Witwatersrand, Johannesburg.)
    Abstract: This paper provides an overview of some of the long-run changes in the relationship between the financial and non-financial aggregate sectors of the South African economy. In particular the paper considers the impact of financialisation on capital investment, consumption, inequality and the capital account. The growth trajectory of the apartheid and post-apartheid periods are considered. It is argued that the nature and form of financialisation that has taken placed in South Africa is conditioned by the nature of industrial and financial developments before 1994
    Keywords: distribution of income, inequality, finance-dominated capitalism, financialisation, industrial development, South Africa
    Date: 2014–12–01
  14. By: Khandker, Shahidur R; Samad, Hussain A
    Abstract: Using long panel survey data collected three times between the years 1991/92 and 2010/11, this paper examines the role of microfinance in poverty reduction in rural Bangladesh. More specifically, in assessing the impact of microfinance on poverty, this paper makes a distinction between the effects of current participation in microfinance programs and those of past participation, and between the effects of continuous participation in microfinance programs and those of irregular participation. Findings suggest that there is a greater decrease in poverty levels for participants in microfinance programs than for non-participants, and for female participants more than for male participants. Additionally, continuous borrowers fare better than irregular borrowers. Overall, microfinance participation, which is found to be cost-effective for borrowers, has contributed to about one-seventh of the total reduction in moderate poverty and one-eleventh of the total reduction in extreme poverty in rural Bangladesh. Finally, this paper recommends the expansion of microfinance funded growth-oriented activities in the non-farm sector, in particular manufacturing and processing activities, so as to reap larger benefits from microfinance.
    Keywords: microfinance , poverty , Bangladesh , rural finance , microfinance dynamics
    Date: 2016–02–19

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