nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒03‒05
thirteen papers chosen by
Karl Petrick
Western New England University

  1. A critique to the expansionary austerity (part III): empirical counter facts beyond theoretical weaknesses By Botta, Alberto; Tori, Daniele
  2. Sraffa, Keynes, Rendite e Sistema Fiscale By Giuseppe Vitaletti
  3. Marxismo ecológico: un recuento crítico del estado del arte By Silva Escobar, Daniel
  4. Why Does the Productivity of Investment Vary Across Countries? By Kevin S. Nell; A.P. Thirlwall
  5. Divesting Fossil Fuels By Trinks, Arjan; Scholtens, Bert; Mulder, Machiel; Dam, Lammertjan
  6. A critical review of entrepreneurial ecosystems research: towards a future research agenda By Borissenko, Janna; Boschma, Ron
  7. Beyond Catch Up: Some Speculations About the Next Twenty Five. By Mundle, Sudipto
  8. Political economy and governance By Evelyn Dietsche
  9. Will America Trigger a Global Trade War? By Uri Dadush
  10. The European dimension: Consequences for European monetary policy By De Grauwe, Paul
  11. Conceptualizing power in the context of climate change: A multi-theoretical perspective on structure, agency & power relations By Stör, Lorenz
  12. Commitment to Equity Handbook. A Guide to Estimating the Impact of Fiscal Policy on Inequality and Poverty By Nora Lustig
  13. Can Coffee Certification Promote Land-sharing and Protect Forest in Ethiopia? By Mitiku, Fikadu; Nyssen, Jan; Maertens, Miet

  1. By: Botta, Alberto; Tori, Daniele
    Abstract: In two previous contributions published in this working paper series, we pointed out the theoretical fragilities of the expansionary austerity theory (EAT). In this paper, we develop our critique even further by integrating the above theoretical investigation with an econometric model testing for the effectiveness of the mechanisms at the basis of the EAT. We consider a sample of developed economies composed by both monetarily sovereign and non-monetarily sovereign countries. Our time spell runs from 2007 to 2016 since that we are interested to assess the solidity of the EAT postulates in the post-crisis period. Our findings reinforce the validity of our original critique, and are fully consistent with out theoretical model. Since 2007, the core mechanisms of the expansionary austerity theory were not at work, to say the least. Austerity measures did not provide any expansionary impulse to economic activity since that the “expectation”, “financial” and “external” channels were inactive at best, or they acted in the opposite direction with respect to what EAT advocates would have suggested. Further, austerity per se did not restore any sense of credibility about public finance solidity on financial markets. Rather, it exacerbated financial turbulences and speculation on the market for sovereign bonds. Interestingly, austerity measures delivered perverse results precisely in those non-monetarily sovereign countries where they were thought to be mostly effective.
    Keywords: fiscal policy; expansionary austerity theory; post-Keynesian macro models; panel data;
    JEL: E12 E61 E62
    Date: 2017–02–26
  2. By: Giuseppe Vitaletti (Università Tuscia)
    Abstract: In the first and second paragraphs the following four important conclusions are reached: a) the price system revolves around an average, with prices depending on technology and the ratio between interest and wages; b) the GDP tends to grow, with fluctuations: this is mostly due to the influence of industry; c) when Investment overtakes Saving, the rate of interest is high; when, on the contrary, Saving overtakes Investment, the rate of interest tends to zero. This happens even if Investment is high; d) the situation of full employment tends to be preserved in any case, because the difference between Saving and Investment is filled up by money, which is one of the commodities of the system. Mathematics has been used to reach such conclusions. In the third and fourth paragraphs no mathematical instrument is used. Five propositions emerge: e) the Keynesian situation, and specifically unemployment, depends on the fact that money is paper-money, and it is no longer one of the commodities of the economic system; f) the only remedy is public debt. When debt becomes high, the rate of interest grows into a sort of rent: an international agreement is needed, to make the rate of interest converge structurally to zero, with regulated exceptions. The control of interest can be of the fiscal type; g) the rents due to decreasing returns are increasingly high. Agriculture, extraction of raw materials, real estate are the principal sectors of generation of such rents; h) an important source of rents, which is stressed in this paper, lies in increasing returns: these ones are due in the first place to markets in which it is normally impossible to enter, and in which there are firms with different quantities: the greater quantities imply rents. Other rents are attached to this situation. All together rents reach around 40% of national GDPs; i) the only way to treat the phenomenon of rents is a fiscal system, which, instead of the present ones, is inspired by De Viti’s and Einaudi’s main ideas. The basis is the benefit principle, and the reporting of the fiscal sovereignty to the nation. The context is a system of soft international regulation, with agreements on public deficit, on the basic rates of taxation, on levies on imports. These arrangements are among the big areas of the world, which agree to the balance in the foreign exchange among them. Only with such organization is it possible to restore the equilibrium between the State and the market.
    Keywords: Sraffa, Keynes, rate of interest, rents, De Viti de Marco, Einaudi, fiscal system
    JEL: D2 D3 E1 H2 H5 H6
  3. By: Silva Escobar, Daniel (Estudios Nueva Economía)
    Abstract: En el presente documento de trabajo se efectúa una revisión crítica de las principales aportaciones hechas por los autores ligados a la corriente científico-política del marxismo ecológico. En primer lugar, se ensaya una definición de lo que actualmente puede entenderse por marxismo ecológico. En segundo término, se realiza una descripción de las principales teorías y conceptos nacidos a partir de esta corriente, privilegiando aquellas que abordan las temáticas de depredación y contaminación ecosistémicas yendo más allá de la simple interpretación exegética de los textos de Marx y Engels. Finalmente, en tercer lugar, se desarrolla una evaluación crítico-comparativa, provisional, de las distintas teorías y conceptos abordados en la sección dos, haciendo especial énfasis en los tópicos más polémicos y relevantes para la política concreta de nuestra época histórica. In this working paper I undertake a critical review of the main contributions developed by the authors associated with the scientific and political school of thought known as Ecological Marxism. First of all, I try to propose a definition of what can be understood today by Ecological Marxism. Secondly, I describe the main theories and concepts originated by this school of thought, giving preference to those that take into account topics like depletion of resources and pollution, going further than the exegetical interpretation of Marx and Engels. Finally, I develop a critical and comparative evaluation of the different theories and concepts reviewed, emphasizing the most controversial and significant issues related to the concrete politics of our time.
    Keywords: Marxismo ecológico; crisis ecológica; crisis económica; modo de producción capitalista; ecosocialismo; Ecological Marxism; ecological crisis; economic crisis; capitalist mode of production; ecosocialism
    JEL: B24 B51 Q54 Q57
    Date: 2016–08–01
  4. By: Kevin S. Nell; A.P. Thirlwall
    Abstract: A country's growth of output is identically equal to its ratio of investment to output and the productivity of investment. In 'new' growth theory regressions, which include the investment ratio, all other included variables pick up why the productivity of investment differs between countries. This paper converts a 'new' growth theory regression equation into productivity of investment equation which allows for the direct testing of the diminishing returns to capital hypothesis of neoclassical growth theory, and to identify the major determinants of differences in the productivity of investment using the general-to-specific model selection algorithm - Autometrics. Nineteen explanatory variables are considered, and export growth, property rights, latitude, and education turn out to be the most important. Eighty-four countries are taken over the period 1980-2011. There is no evidence of diminishing returns to capital across countries, so investment matters for long run growth.
    Keywords: 'new' growth theory; productivity of investment; cross-country growth regressions
    Date: 2017–03
  5. By: Trinks, Arjan; Scholtens, Bert; Mulder, Machiel; Dam, Lammertjan (Groningen University)
    Abstract: Fossil fuel divestment campaigns urge investors to sell their stakes in companies that supply coal, oil, and gas. However, avoiding investments in such companies can be expected to impose a financial cost on the investor because of reduced opportunities for portfolio diversification. We compare the risk-adjusted return performance of investment portfolios with and without fossil fuel companies over the period 1927-2015. Contrary to theoretical expectations, we find that fossil-free investing does not seem to impair financial performance. These findings can be explained by the fact that fossil fuel company portfolios do not generate above-market performance and provide relatively limited diversification benefits. Significant performance impacts of a divestment strategy, however, are observed over short time frames and when applying divestment to less diversified investment portfolios.
    Date: 2017
  6. By: Borissenko, Janna (CIRCLE, Lund University); Boschma, Ron (CIRCLE, Lund University)
    Abstract: The Entrepreneurial Ecosystem (EE) literature has attracted much attention, especially in policy circles. However, the concept suffers from a number of shortcomings: (1) it lacks a clear analytical framework that makes explicit what is cause and what is effect in an entrepreneurial ecosystem; (2) while being a systemic concept, the EE has not yet fully exploited insights from network theory, and it is not always clear in what way the proposed elements are connected in an entrepreneurial ecosystem; (3) it remains a challenge what institutions (and at what spatial scale) impact on the structure and performance of EE; (4) studies have often focused on the EE in single regions or clusters, but lack a comparative and multi-scalar perspective; (5) the EE literature tends to provide a static framework taking a snapshot of EE without considering systematically their evolution over time. For each of these shortcomings, we make a number of suggestions to take up in future research on EE.
    Keywords: Entrepreneurial ecosystem; Entrepreneurial system; Networks; Entrepreneurship; Clusters
    JEL: L26 M21 O33
    Date: 2017–02–23
  7. By: Mundle, Sudipto (National Institute of Public Finance and Policy)
    Abstract: In his book Catch Up, Deepak Nayyar has identified a total of twenty five developing countries (excluding Taiwan) as having the most potential for catching up with the developed countries. This paper speculates about the likely status of these countries, Nayyar's `Next Twenty Five', around the middle of the 21st century. Drawing on his own earlier work on the subject as well as the recent contributions of Acemoglu and Robinson, among others, the author first presents the elements of a theory of economic history as the dynamics of interactions between resource endowments, technology and institutions, mediated by the cumulative impact of incremental change as well as transformative shocks at critical junctures. The prospects of the `Next Twenty Five' are then assessed through the lens of this theoretical framework, recognising that outcomes are probabilistic in a Bayesian sense and not deterministic. Size matters because very large and very small countries have their own specific dynamic. Hence, two very large countries, China and India, and two very small countries, Tunisia and Honduras, are separately analysed. In assessing the prospects of the other twenty one countries in the group, the paper addresses the question of why there is a distinct geographic pattern of the catch up process working more powerfully in Asia as compared to Latin America or Africa.
    Keywords: developing countries ; institutions ; theory of economic history ; China ; India ; Asia ; Africa ; Latin America ; transformative shocks ; critical junctures ; incremental change ; Acemoglu Robinson
    JEL: O43 N10 B52
    Date: 2017–01
  8. By: Evelyn Dietsche
    Abstract: This paper reviews the political economy of extractive resources and the associated resources sector governance agenda. The consensus that good sector governance improves the developmental impacts of extractive resources exploitation is premised on the understanding that institutions matter for development. However, there is no straightforward answer to the question of what exactly ‘institutions’ are, how they change, or how they can be made to change to become more supportive of an extractives-led development agenda. The paper suggests reframing the political economy of extractive resources away from the negative question how can poor outcomes be prevented? and towards the positive question how can positive institutional change for better outcomes be brought about?. It organizes and presents the main strands of a substantial body of literature that can help to inform answers to these questions.
    Date: 2017
  9. By: Uri Dadush
    Abstract: The new Trump administration is openly protectionist. The President called for “America First” and for “Buy American, Hire American” in his inaugural speech and his subsequent actions dispelled any remaining doubt that he meant what he said during the election campaign. As promised, he has withdrawn from the Trans-Pacific Partnership, an agreement among twelve countries across three continents that took nearly 10 years to negotiate. He has threatened American companies that invest abroad with punitive taxes and tariffs. He has signed an executive order to build a wall along the Mexican border, and he has threatened Mexico to impose a tax on its exports to the United States to pay for it. At the same time, he has ordered his team to initiate renegotiation of NAFTA, which he considers “a very bad deal”. Mr. Trump’s protectionist sentiments are not new: his many calls to refute “bad trade deals” date back to the 1980s.
    Date: 2017–02
  10. By: De Grauwe, Paul
    Abstract: [Introduction] The Eurozone creates a number of new challenges in policy-making in Europe. These challenges exist both for the monetary and the fiscal authorities. In this workpackage we aim at providing novel insights in the nature of these challenges using new approaches in modelling the macro economy. These new approaches highlight the importance of multiple equilibria, herd behaviour and animal spirits (market sentiments). The first challenge is for the monetary authorities to understand the nature of the transmission of monetary policies. We analyse this transmission process using a behavioural macroeconomic model in which animal spirits play a major role. We contrast this transmission process in a bank based with a market based financial model. As the Eurozone is mainly based on bank finance the comparison with a market based financial model will allow us to identify what is special in the monetary transmission process in the Eurozone. The second challenge has to do with crisis management. During financial crises panic and fear is likely to take over, creating a potential for self-fulfilling liquidity crises. These can push countries into a bad equilibrium that forces them into imposing excessive austerity thereby reinforcing deflationary dynamics. We provide evidence that these forces have been at work during the sovereign debt crisis of 2010-12. The third challenge relates to the governance of the Eurozone. It is clear that the Eurozone has not yet achieved a governance structure that will guarantee its long run survival. In a third contribution we use empirical evidence about the nature of economic shocks in the Eurozone to analyse how the Eurozone should be redesigned so as to become sustainable in the long run.
    Date: 2016
  11. By: Stör, Lorenz
    Abstract: The predominantly positivist approach in economics towards the object of study is not able to grasp power and domination in its complex interaction of agency and structure. Also in ecological economics and its critique to economic growth, there is a lack of conceptualizations that are sensible to questions of power. The work reveals such deficits and offers a comprehensive theory overview. This overview is then contextualized along the political-economic facets of climate change. The introductory chapter discusses fundamental aspects of power in the context of structure and agency. The common positivist approach in economics is complemented by a post-positivist approach in the following chapter. Critical realism serves as a philosophy of science to acknowledge and integrate structure and agency as forms of power. The third chapter provides an historical overview of selected theories of power. It depicts how the strategic and the episodic understanding of power by Machiavelli and Hobbes respectively, informed later power theories. Theorists such as Dahl, Bachrach & Baratz, Lukes, Gramsci, Laclau & Mouffe, Giddens, Foucault and Clegg are discussed. The aim is to highlight the relevance for a multiplicity of power concepts in economic research. The following chapter puts in context their respective positions on human agency and social structures as the source of power. The fifth chapter initiates an outlook for potential power research on future global challenges. The powers that play a role in the quest for solutions on the issue of climate change are systematically separated in the multiple levels of agency, mechanisms and structure. This serves as an exemplary case to depict the complexity but relevance of power on objects of research in ecological economics.
    Keywords: Power,Structure,Agency,Climate Change,Hegemony,Structuration theory,Machiavelli,Hobbes,Dahl,Lukes,Gramsci,Giddens,Foucault,Hay,Jessop,Macht,Struktur,Handlung,Klimawandel,Hegemonie,Strukturationstheorie
    Date: 2017
  12. By: Nora Lustig (Stone Center for Latin American Studies, Department of Economics, Tulane University.)
    Abstract: This handbook is a unique manual detailing the theory and practical methods developed by the Commitment to Equity (CEQ) Institute for determining the impact of fiscal policy on inequality and poverty. Policymakers, social planners, and economists are presented with a step-by- step guide to applying fiscal incidence analysis as well as country studies -- CEQ Assessments-- to illustrate. The handbook has four parts. Part I, Methodology, describes what a Commitment to Equity (CEQ) Assessment is and presents the theoretical underpinnings of fiscal incidence analysis and the indicators used to assess the distributive impact and effectiveness of fiscal policy. Part II, Implementation, presents how taxes, subsidies, and social spending should be allocated to households. It includes a step-by step guide to completing the CEQ Master Workbook of Results, a multi-sheet excel file that houses both detailed information on the country’s fiscal system and the results used as inputs for policy discussions, academic papers and policy reports. Part III, Applications, presents applications of the CEQ framework to low and middle-income countries, including simulations of policy reforms. Part IV, Tools, contains the CEQ Master Workbook of Results and the CEQ Stata Package with user-written software to complete it. It also contains guidelines for the implementation of CEQ Assessments, including a thorough protocol of quality control.
    Keywords: handbook, taxes and transfers, fiscal incidence, poverty, inequality
    JEL: H22 D31 D63 I32 I38
    Date: 2016–10
  13. By: Mitiku, Fikadu; Nyssen, Jan; Maertens, Miet
    Abstract: We analyze whether private sustainability standards can promote land-sharing between coffee cultivation and forest conservation in southwestern Ethiopia. We compare garden and forest coffee systems, including non-certified and Rainforest Alliance (RA) certified forest coffee, and evaluate yields, productivity and profits. We use original household- and plot-level survey data from 454 households and 758 coffee plots, and ordinary least squares and fixed effects regression models. We find that coffee intensification from semi-forest coffee to garden coffee does not yield any substantial economic benefits in terms of productivity or profit. We find that RA certification increases land and labor productivity and profits of semi-forest coffee production, mainly by guaranteeing farmers a better price and not by improving yields. These findings imply that in southwestern Ethiopia land-sharing between less intensive coffee production and conservation of forest tree species is a viable sustainability strategy from an economic point of view, and that coffee certification is a viable strategy to promote land-sharing and create the economic incentives for farmers to refrain from further coffee intensification.
    Keywords: Forest coffee, Land-sharing, Rainforest Alliance, Coffee intensification, Sustainability Standards, Ethiopia, Agricultural and Food Policy, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2017

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