nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒05‒14
eleven papers chosen by
Karl Petrick
Western New England University

  1. Stagnation traps By Gianluca Benigno; Luca Fornaro
  2. Wealth Concentration, Income Distribution, and Alternatives for the USA By Lance Taylor; Özlem Ömer; Armon Rezai
  3. The Heckscher-Ohlin-Samuelson Model and the Cambridge Capital Controversies By Kazuhiro Kurose; Naoki Yoshihara
  4. "Measuring Poverty in the Case of Buenos Aires: Why Time Deficits Matter" By Rania Antonopoulos; Valeria Esquivel; Thomas Masterson; Ajit Zacharias
  5. J.M. Keynes and F.H. Knight : How to Deal with Risk, Probability and Uncertainty By Yasuhiro Sakai
  6. "Maximizing Price Stability in a Monetary Economy" By Warren Mosler; Damiano B. Silipo
  7. Global firms By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  8. Publicly Funded Clinical Trials: A Route to Sustained Innovation with Affordable Drugs By Dean Baker
  9. Still Working Hard: An Update on the Share of Older Workers in Physically Demanding Jobs By Cherrie Bucknor; Dean Baker
  10. The American Dual Economy: Race, Globalization, and the Politics of Exclusion By Peter Temin
  11. The Taxing Deed of Globalization By Egger, Peter; Nigai, Sergey; Strecker, Nora

  1. By: Gianluca Benigno; Luca Fornaro
    Abstract: We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms' investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth.
    Keywords: secular stagnation; liquidity traps; growth traps; endogenous growth; multiple equilibria
    JEL: J1 N0
    Date: 2016–02
  2. By: Lance Taylor (New School for Social Research); Özlem Ömer (New School for Social Research); Armon Rezai (Vienna University of Economics)
    Abstract: US household wealth concentration is not likely to decline in response to fiscal interventions alone. Creation of an independent public wealth fund could lead to greater equality. Similarly, once-off tax/transfer packages or wage increases will not reduce income inequality significantly; on-going wage increases in excess of productivity growth would be needed. These results come from the accounting in a simulation model based on national income and financial data. The theory behind the model borrows from ideas that originated in Cambridge UK (especially from Luigi Pasinetti and Richard Goodwin).
    Keywords: Wealth distribution, income distribution, Cambridge theory.
    JEL: D31 D33 D58 B50
  3. By: Kazuhiro Kurose; Naoki Yoshihara
    Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. Additionally, it presents a survey of the literature on Heckscher-Ohlin-Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). Furthermore, this paper discusses the Cambridge capital controversy, which contends that marginal productivity theory does not hold when capital is assumed to be as a bundle of reproducible commodities instead of as a primary factor. Consequently, it is shown that under this assumption, the FPET does not hold, even when there is no reversal of capital intensity. This paper also demonstrates that the recent studies on the dynamic HOS trade theory generally ignore the difficulties posed by the capital controversies and are thereby able to conclude that the FPET holds even when capital is modelled as a reproducible factor. Our analysis suggests that there is a need for a basic theory of international trade that does not rely on factor price equalisation and a model that formulates capital as a bundle of reproducible commodities.
    Date: 2016–03–31
  4. By: Rania Antonopoulos; Valeria Esquivel; Thomas Masterson; Ajit Zacharias
    Abstract: We describe the production of estimates of the Levy Institute Measure of Time and Income Poverty (LIMTIP) for Buenos Aires, Argentina, and use it to analyze the incidence of time and income poverty. We find high numbers of hidden poor--those who are not poor according to the official measure but are found to be poor when using our time-adjusted poverty line. Large time deficits for those living just above the official poverty line are the reason for this hidden poverty. Time deficits are unevenly distributed by employment status, family type, and especially gender. Simulations of the impact of full-time employment on those households with nonworking (for pay) adults indicate that reductions in income poverty can be achieved, but at the cost of increased time poverty. Policy interventions that address the lack of both income and time are discussed.
    Keywords: Income Poverty; Economic Well-Being; Employment Policy; Fiscal Policy; Gender Disparities; Household Production; Levy Institute Measure of Time and Income Poverty (LIMTIP); Time Deficits; Argentina; Unpaid Work
    JEL: C14 C40 D31 J22
    Date: 2016–05
  5. By: Yasuhiro Sakai (Faculty of Economics, Shiga University)
    Abstract: The purpose of this paper is to discuss and compare two giants in the history of economic thought, J.M. Keynes and F.H. Knight, with special reference to risk, probability, and uncertainty. It is in 1921 that both of them published apparently published similar books on the economics of risk and uncertainty. While Knight's contribution on risk and uncertainty is now well recognized, Keynes's accomplishments on probability and uncertainty have been rather ignored in the shadow of his most famous book The General Theory of Employment, Interest and Money (1936). This paper aims to focus on his earlier yet equally important book A Treatise on Probability (1921), and shed a new light on his outstanding ideas and everlasting influences on his later work including The General Theory. It is really interesting to see that Keynes's concept of probability and uncertainty can be well compared to Knight's distinction between a measurable risk and a non-measurable uncertainty.
    Keywords: Keynes, Knight, risk, probability, uncertainty
    Date: 2016–03
  6. By: Warren Mosler; Damiano B. Silipo
    Abstract: In this paper we analyze options for the European Central Bank (ECB) to achieve its single mandate of price stability. Viable options for price stability are described, analyzed, and tabulated with regard to both short- and long-term stability and volatility. We introduce an additional tool for promoting price stability and conclude that public purpose is best served by the selection of an alternative buffer stock policy that is directly managed by the ECB.
    Keywords: European Central Bank; Monetary Policy Tools and Price Stability; Buffer Stock Policy
    JEL: E52 E58
    Date: 2016–04
  7. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now standard heterogeneous firm model posits a continuum of firms that compete under monopolistic competition (and hence are measure zero) and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and are large relative to the markets in which they operate. We outline a framework that allows firms to be of positive measure and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. We use this framework to interpret features of U.S. firm and trade transactions data and highlight interdependencies across these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and explaining their dominance of aggregate international trade.
    Keywords: firm heterogeneity; international trade; multinationals; multi-product firms
    JEL: E21 E24 F53 O32 O47
    Date: 2016–04
  8. By: Dean Baker
    Abstract: The current system of financing pharmaceutical research through patent monopolies or other forms of market exclusivity is fundamentally flawed. It creates an altogether unnecessary problem by making drugs that are cheap to produce extremely expensive to the patients who need them. The fact that most of the cost is borne by third party payers undermines the traditional argument for market prices as conveying information about households’ desires. This system of pricing also leads to the sort of waste and corruption that would be predicted from a system in which government granted monopolies lead to items being sold at prices that are typically several thousand percent above their cost of production. This proposal outlines a plan for a pilot project of public financed clinical trials. Under this proposal, government(s) would set aside a limited amount of funding to finance clinical trials and bring drugs through national approval processes. This funding would be awarded under long-term contracts (8–10) years on a competitive basis. The winners of the contracts would test promising compounds of their choosing in the areas where they have designated an interest. As a condition of getting the funding, all the results of the tests will be fully available to the public. In addition, whatever drugs are approved would have no exclusivity conditions, so they could be sold as generics. In addition to making potentially important new drugs available to the public, this pilot will set a model for transparency in research. The practice of disclosing all test results in a timely manner should pressure other pharmaceutical companies to adopt the same practice. In addition, since the contracts and the number of trials will all be public information, this project will also provide substantial insights into the cost of clinical trials and drug development.
    JEL: I I1 I18 I14
    Date: 2016–03
  9. By: Cherrie Bucknor; Dean Baker
    Abstract: A recurring theme in debates over Social Security policy is that workers should be encouraged to work later into their lives by raising the age at which they can get full benefits. Implicit in this argument is that most workers are in a situation where they would be able to work to an older age; however, many older workers stop working because they can no longer meet the physical demands of their job. In 2010, CEPR did an analysis that examined the percentage of older workers (ages 58 and over) who either worked in physically demanding jobs or in difficult work conditions. This paper is an update of that earlier study and is based on data from 2014. Using data from the Current Population Survey (CPS) and Occupational Information Network (O*NET) it finds that in 2014, 8.0 million workers ages 58 and older (34.5 percent) had physically demanding jobs, while 5.1 million workers ages 58 and older (22.1 percent) had jobs with difficult working conditions. About 10.2 million workers ages 58 and older (43.8 percent) were employed either in physically demanding jobs or jobs with difficult working conditions. The workers who were most likely to be in these jobs were Latinos, the least educated (less than a high school diploma), immigrants, and the lowest wage earners. Physically demanding jobs include general physical activities, handling and moving objects, spending significant time standing, walking or running, making repetitive motions, or having any highly physically demanding work. Highly physically demanding jobs require dynamic, explosive, static, or trunk strength, bending or twisting of the body, stamina, maintaining balance, or kneeling or crouching. Difficult working conditions include working in a cramped workspace, labor outdoors, or exposure to abnormal temperatures, contaminants, hazardous equipment, whole body vibration, or distracting or uncomfortable noise.
    JEL: H H6 H62 H63 H68 J J1 J14 J18 J3 J32 J38
    Date: 2016–03
  10. By: Peter Temin (Massachusetts Institute of Technology)
    Abstract: I describe the American economy in the twenty-first century as a dual economy in the spirit of W. Arthur Lewis. Similar to the subsistence and capitalist economies characterized by Lewis, I distinguish a low-wage sector and a FTE (Finance, Technology, and Electronics) sector. The transition from the low-wage to the FTE sector is through education, which is becoming increasingly difficult for members of the low-wage sector because the FTE sector has largely abandoned the American tradition of quality public schools and universities. Policy debates about public education and other policies that serve the low-wage sector often characterize members of the low-wage sector as black even though the low-wage sector is largely white. This model of a modern dual economy explains difficulties in many current policy debates, including education, healthcare, criminal justice, infrastructure and household debts.
    Keywords: inequality, dual economy, race, education, criminal justice, Nixon, Reagan, political economy
    JEL: H53 J68 N32
    Date: 2015–11
  11. By: Egger, Peter; Nigai, Sergey; Strecker, Nora
    Abstract: We examine the effects of globalization on the size and composition of tax revenues, worker-specific tax burdens, and effective average labor income tax rates using a unique international database on income tax calculators. We find that due to increasing mobility of firms and high-income workers, globalization led governments in OECD countries to seek tax revenues from alternative sources, specifically from employee-borne taxes paid by relatively less mobile middle-income workers. In 1994-2007, they experienced a globalization-induced rise in their personal income tax rate of around 1.5, whereas the top 1% of workers faced a reduction of approximately 1.5 percentage points.
    Keywords: Globalization; Income taxes; International Trade; migration; Tax progressivity
    JEL: F1 F6 H2 H3
    Date: 2016–05

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