nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒09‒04
nine papers chosen by
Karl Petrick
Western New England University

  1. Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies By Ewa Karwowski; Engelbert Stockhammer
  2. Working Paper: The Compensation of Highly Paid Professionals: How Much Is Rent? By Dean Baker
  3. Black Workers, Unions, and Inequality By Cherrie Bucknor
  4. Networks: An economic perspective By Jackson, Matthew O.; Rogers, Brian; Zenou, Yves
  5. Priority for the Worse Off and the Social Cost of Carbon By Matthew Adler; David Anthoff; Valentina Bosetti; Greg Garner; Klaus Keller; Nicolas Treich
  6. Institutions Without Culture. A Critique of Acemoglu and Robinson's Theory of Economic Development By Joanna Dzionek-Kozlowska; Rafal Matera
  7. Inequality and the Social Cost of Carbon By David Anthoff; Johannes Emmerling
  8. Did the Paris Agreement Plant the Seeds of a Climate Consistent International Financial Regime? By Dipak Dasgupta; Etienne Espagne; Jean-Charles Hourcade; Irving Minzer; Seyni Nafo; Baptiste Perissin-Fabert; Nick Robins; Alfredo Sirkis
  9. Principles of (Behavioral) Economics By David Laibson; John List

  1. By: Ewa Karwowski; Engelbert Stockhammer
    Abstract: Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bank-based to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.
    Keywords: financialisation, emerging markets, financial instability, asset price volatility, heterodox economics
    JEL: B50 E30 F34 G01 G12 G15
    Date: 2016–08
  2. By: Dean Baker
    Abstract: Highly educated professionals in the United States, such as doctors and lawyers, earn salaries that are considerably higher than their counterparts in other wealthy countries. In many cases the ratios of pay in the United States to that of other wealthy countries exceeds two to one. These gaps are not explained by differences in per capita income, which are not nearly as large, or pay scales more generally. In many occupations U.S. workers get lower pay than their counterparts in other wealthy countries. This paper examines the evidence that the pay gap is due to protectionist measures that restrict competition. The most important of these protectionist measures are licensing practices that both unnecessarily restrict domestic competition and also prevent foreign-trained professionals from practicing their profession in the United States. There is a considerable amount of money at stake in excess pay for U.S. professionals. Higher pay for doctors alone costs close to $100 billion annually (more than 0.5 percent of GDP). Adding in the excess pay for other professionals could double this amount.
    JEL: J J4
    Date: 2016–08
  3. By: Cherrie Bucknor
    Abstract: This study uses the most recent Census Bureau data available to examine the trends in unionization for Black workers, focusing on unionization rates as well as the demographic composition of the Black union workforce. This paper also presents data on the impact of unionization on the wages and benefits of Black workers and how these benefits work to reduce racial wage inequality. Unionization rates have been in decline across the board for decades. Despite this fact, Black workers are still more likely than workers of any other race or ethnicity to be unionized. In 2015, 14.2 percent of Black workers and 12.3 percent of the entire workforce were represented by unions, down from 31.7 percent and 23.3 percent, respectively, in 1983. This large decline in unionization has occurred alongside, and contributed to, an increase in overall wage inequality, as well as the widening Black-white wage gap.
    JEL: I I2 I24 J J1 J15 J11
    Date: 2016–08
  4. By: Jackson, Matthew O.; Rogers, Brian; Zenou, Yves
    Abstract: We discuss social network analysis from the perspective of economics. We organize the presentation around the theme of externalities: the effects that one's behavior has on others' welfare. Externalities underlie the interdependencies that make networks interesting to social scientists. We discuss network formation, as well as interactions between peoples' behaviors within a given network, and the implications in a variety of settings. Finally, we highlight some empirical challenges inherent in the statistical analysis of network-based data.
    Keywords: economic networks; externalities; Game theory; network formation; network games; Networks; peer effects; Social Networks
    JEL: C72 D85 L14 Z13
    Date: 2016–08
  5. By: Matthew Adler (Duke University School of Law); David Anthoff (Energy and Resources Group, University of California); Valentina Bosetti (Bocconi University); Greg Garner (The Pennsylvania State University); Klaus Keller (The Pennsylvania State University and Carnegie Mellon University); Nicolas Treich (INRA, University of Toulouse)
    Abstract: The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF)—one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. Here, we use a prioritarian SWF, with no time-discount factor, to calculate the SCC in the integrated assessment model RICE. Prioritarianism is a well-developed concept in ethics and theoretical welfare economics, but has been, thus far, little used in climate scholarship. The core idea is to give greater weight to well-being changes affecting worse off individuals. We find substantial differences between the discounted-utilitarian and non-discounted prioritarian SCC.
    Keywords: Prioritarianism, Social Welfare Function, Social Cost of Carbon
    JEL: Q54 I30
    Date: 2016–08
  6. By: Joanna Dzionek-Kozlowska (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz); Rafal Matera (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz)
    Abstract: Acemoglu and Robinson’s theory presented in their famous Why Nations Fail, and other papers, should be placed among the institutional theories of economic development. Yet the problem is they strongly differentiate their concept from the so-called culture hypothesis, which they reject. This stance is difficult to accept, not only because of the significance of culture-related factors of economic development, but it is also difficult to reconcile with their own model. The aim of this paper is to demonstrate that such a strong rejection of the culture hypothesis is inconsistent with their own analysis, triggers some principal problems with understanding the basic notion of institution, and suggests Acemoglu and Robinson are only focused on considering formal institutions. The article concludes with the statement that, paradoxically, Acemoglu and Robinson’s unconvincing rejection of the culture hypothesis may be regarded as a justification of the importance of culture-related factors.
    Keywords: Institutional Economics, Daron Acemoglu, James Robinson, Institutions vs Culture Controversy, Economic Development
    JEL: B52 O10 Z10
    Date: 2016–08
  7. By: David Anthoff (Energy and Resources Group, University of California); Johannes Emmerling (Fondazione Eni Enrico Mattei (FEEM))
    Abstract: This paper presents a novel way to disentangle inequality aversion over time from inequality aversion between regions in the computation of the Social Cost of Carbon. Our approach nests a standard efficiency based Social Cost of Carbon estimate and an equity weighted Social Cost of Carbon estimate as special cases. We also present a methodology to incorporate more fine grained regional resolutions of income and damage distributions than typically found in integrated assessment models. Finally, we present quantitative estimates of the Social Cost of Carbon that use our disentangling of different types of inequality aversion. We use two integrated assessment models (FUND and RICE) for our numerical exercise to get more robust findings. Our results suggest that inequality considerations lead to a higher (lower) SCC values in high (low) income regions relative to an efficiency based approach, but that the effect is less strong than found in previous studies that use equity weighting. Our central estimate is that the Social Cost of Carbon increases roughly by a factor of 2.5 from a US perspective when our disentangled equity weighting approach is used.
    Keywords: Social Cost of Carbon, Inequality, Climate Change, Discounting, Equity Weighting, Integrated Assessment Model
    JEL: D63 H43 Q54
    Date: 2016–08
  8. By: Dipak Dasgupta (The Energy & Resource Institute (TERI)); Etienne Espagne (Centre d’Etudes Prospectives et d’Information Internationale (CEPII)); Jean-Charles Hourcade (Centre International de Recherche sur l’Environnement et le Développement (CIRED)); Irving Minzer (Johns Hopkins University, School of Advanced International Studies (SAIS)); Seyni Nafo (African Group at the UNFCCC); Baptiste Perissin-Fabert (Commissariat Général au Développement Durable (CGDD)); Nick Robins (Inquiry into the Design of a Sustainable Financial System (UNEP)); Alfredo Sirkis (Centro Brasil no Clima (CBC))
    Abstract: Finance has been critical to the development of interest and momentum concerning the Paris Agreement, which emerged from COP21. However, a quick scan of the accord could lead many to derive a disappointing picture because of the absence of practical commitments to financial devices that can limit the risks of climate change. We support the opposite view that the text marks a new departure by committing countries to “making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development ». This was matched by parallel developments such as the Financial Stability Board’s launch of a new Task Force on climate disclosure. We argue that, further steps now need to be taken within the broader context of financing the new model of prosperity laid out in the UN Sustainable Development Goals (UN, September 2015). At a time of increasing financial uncertainty and inadequate investment in the real economy, putting in place a framework for financing the transition to a low-carbon, resilient model of development is now an economic imperative – and an immense opportunity. Mitigating the systemic risks of climate change while putting the global financial system on a path toward balanced and sustainable development, is in the long-term strategic interests of both industrialized and developing countries and we suggest what practical steps can be accomplished in a near future in this direction.
    Keywords: COP 21, Paris Agreement, Climate Finance
    JEL: Q5 Q58 F53
    Date: 2016–07
  9. By: David Laibson; John List
    Abstract: There are many great ways to incorporate behavioral economics in a first-year undergraduate economics class-i.e., the course that is typically called "Principles of Economics." Our preferred approach integrates behavioral economics throughout the course (e.g., see Acemoglu, Laibson, and List 2015). With the integrated approach, behavioral content plays a role in many of the chapters of the principles of economics curriculum, including chapters on optimization, equilibrium, game theory, intertemporal choice, probability and risk, social preferences, household finance, the labor market, financial intermediation, monetary policy, economic fluctuations, and financial crises. We prefer the integrated approach because it enables the behavioral insights to show up where they are conceptually most relevant. By illustration, it is best to combine a discussion of downward nominal wage rigidity (i.e., the idea that workers strongly resist nominal wage declines) with the overall discussion of the labor market. Whether or not an instructor integrates behavioral economics throughout the principles of economics course, it makes sense to pull central materials together and dedicate a lecture (or more) to a focused discussion of behavioral economics. This note describes our approach to such a lecture, emphasizing six key principles of behavioral economics. Our choice of content for a behavioral lecture is motivated by three factors. First, we include ideas that are conceptually important. Second, we include material that is practically important and personally relevant to our students-we have found that such content resonates long after the course ends. Third, we include content that relates to what has been (or will be) taught in the rest of the course, and therefore serves as a complement. We want students to see that behavioral economics is an integrated part of economics, not a freak show that is isolated from "the standard ingredients" in the rest of the economics course. This paper summarizes our approach to such a focused behavioral lecture. In Section I, we define behavioral economics and place it in historical context. In Section II, we introduce six modular principles that can be used to teach behavioral economics. We provide PowerPoint notes on our home pages, which instructors should feel free to edit and use.
    Date: 2015

This nep-pke issue is ©2016 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.