nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒06‒18
twelve papers chosen by
Karl Petrick
Western New England University

  1. Financialisation, distribution & the macroeconomic regimes before & after the crisis: A post-Keynesian view on Denmark, Estonia & Latvia By Dünhaupt, Petra; Hein, Eckhard
  2. Will wealth become more concentrated in Europe? Evidence from a calibrated neo-Kaleckian model By Stefan Ederer; Miriam Rehm
  3. Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010 By Engelbert Stockhammer; Joel Rabinovich; Niall Reddy
  4. The theoretical basis of the CGIL's analysis of the Italian economic decline By Guglielmo Forges Davanzati; Nicolò Giangrande
  5. The impact of financialisation on the wage share: a theoretical clarification and empirical test By Karsten Kohler; Alexander Guschanski; Engelbert Stockhammer
  6. The roots of the Euro By Labrinidis, George
  7. Destabilizing orders - Understanding the consequences of neoliberalism. Proceedings of the MaxPo Fifth-Anniversary Conference, Paris, January 12-13, 2018 By Andersson, Jenny; Godechot, Olivier
  8. The drivers of household indebtedness re-considered: an empirical evaluation of competing arguments on the macroeconomic determinants of household indebtedness in OECD countries By Glennie Lauren Moore; Engelbert Stockhammer
  9. Central Banking and Macroeconomic Ideas: Economics, Politics and History By Donato Masciandaro
  10. "European Sovereign Bond-Backed Securities: An Assessment and an Alternative Proposal" By Mario Tonveronachi
  11. We are Ninjas: How Economic History has Infiltrated Economics By Claude Diebolt; Michael Haupert
  12. The Geography of Poverty and Nutrition: Food Deserts and Food Choices across the United States By Allcott, Hunt; Diamond, Rebecca; Dube, Jean-Pierre

  1. By: Dünhaupt, Petra; Hein, Eckhard
    Abstract: Since the early 1980s, financialisation has become an increasingly important trend in developed capitalist countries, with different beginnings, speed and intensities in different countries. Rising inequality has been a major feature of this trend. Shares of wages in national income have declined and personal income inequality has increased. Against this background unsustainable demand and growth regimes have developed and dominated the major economies before the crisis: the "debt-led private demand boom" and the "export-led mercantilist" regime. The current paper applies this post-Keynesian approach on the macroeconomics of finance-dominated capitalism to three Baltic Sea countries, Denmark, Estonia and Latvia, both for the pre-crisis and the post-crisis period. First, the macroeconomics of finance-dominated capitalism are briefly reiterated. Second, the financialisation-distribution nexus is examined for the three countries. Third, macroeconomic demand and growth regimes are analysed, both before and after the crisis.
    Keywords: finance-dominated capitalism,financialisation,distribution,financial and economic crisis,Kaleckian theory of distribution
    JEL: D31 D33 D43 F40 F43 G01
    Date: 2018
  2. By: Stefan Ederer; Miriam Rehm (Federal Chamber of Labour Vienna (AT))
    Abstract: We develop and calibrate an analytical growth model in the neo-Kaleckian tradition with an endogenous wealth distribution and differential returns to wealth between workers and capitalists. We show that a long-run equilibrium allows for non-zero wealth owned by workers, even as the model contains the “triumph of the rentier” predicted by Piketty’s r > g as a special case. The model’s calibration to ten European countries shows that the distribution of wealth is likely to become more unequal in all cases, barring political countermeasures.
    Keywords: inequality, wealth, income, neo-Kaleckian theory, model calibration
    JEL: D31 E12 E21
    Date: 2017–12
  3. By: Engelbert Stockhammer; Joel Rabinovich; Niall Reddy
    Abstract: Most empirical macroeconomic research limited to the period since World War II. This paper analyses the effects of changes in income distribution and in private wealth on consumption and investment covering a period from as early as 1855 until 2010 for the UK, France, Germany and USA, based on the dataset of Piketty and Zucman (2014). We contribute to the post-Keynesian debate on the nature of demand regimes, mainstream analyses of wealth effects and the financialisation debate. We find that overall domestic demand has been wage-led in the USA, UK and Germany. Total investment responds positively to higher wage shares, which is driven by residential investment. For corporate investment alone, we find a negative relation. Wealth effects are found to be positive and significant for consumption in the USA and UK, but weaker in France and Germany. Investment is negatively affected by private wealth in the USA and the UK, but positively in France and Germany.
    Keywords: historical macroeconomics, demand regimes, Bhaduri-Marglin model, wealth effects, financialisation
    JEL: B50 E11 E12 E20 E21 N10
    Date: 2018–03
  4. By: Guglielmo Forges Davanzati; Nicolò Giangrande
    Abstract: This paper deals with the Italian economic decline from a double perspective. First, it provides a reconstruction of the main Post Keynesian arguments explaining the bad macroeconomic performance of the Italian economy, starting from the end of the “economic miracle”. Second, it proposes a re-reading of the CGIL’s view, showing that is it consistent with a theoretical approach based on the fundamental assumptions and policy prescriptions of the Post Keynesian framework.
    Keywords: Italian economic decline, labour market, unions
    JEL: E60 J50
    Date: 2018–01
  5. By: Karsten Kohler (None); Alexander Guschanski; Engelbert Stockhammer
    Abstract: It is frequently asserted that financialisation has contributed to the decline in the wage share. This paper provides a theoretical clarification and a systematic empirical investigation. We identify four channels through which financialisation can affect the wage share: (1) enhanced exit options of firms; (2) rising price mark-ups due to financial overhead costs for businesses; (3) increased competition on capital markets and shareholder value orientation; and (4) the role of household debt in increasing workers’ financial vulnerability and undermining their class consciousness. The paper compiles a comprehensive set of empirical measures of financialisation and uses it to test these hypotheses with a panel regression of 14 OECD countries over the 1992-2014 period. We find strong evidence for negative effects of financial liberalisation and financial payments of non-financial corporations on the wage share that are in the same order of magnitude as the effects of globalisation.
    Keywords: financialization, income distribution, political economy
    JEL: E25
    Date: 2018–01
  6. By: Labrinidis, George
    Abstract: Indisputably, the euro has played a pivotal role in the development of Europe. Yet, the euro has also been very controversial, raising many discussions related to the nature, role and form of the “common currency”. This paper aims at contributing to this ongoing debate from a Marxist perspective, presenting the theoretical framework of quasi-world money and examining the evolution of the euro as such, from the 1950s when the idea appeared for the first time. In particular, the paper focuses on the processes that led to the emergence of the euro as quasi-world money. These processes comprised a series of political solutions to the contradiction between the necessity of all major European countries to impose their money on the European market on the one hand, and their incompetence in doing so, on the other. The analysis focuses on the post-war European monetary system up until the launch of the European Monetary Union. Its object is a historical monetary compromise that passed through many phases and managed to survive until the present day. The paper analyses the particular mechanisms through which the euro became a reality and points to the class interests that were satisfied in each phase. This discussion offers useful insights for the current debate that unfolds amidst a deep capitalist crisis internationally and a particular monetary crisis in the European Union.
    Keywords: Euro, quasi-world money, European monetary system
    JEL: B14 E42 F33
    Date: 2018–04–23
  7. By: Andersson, Jenny; Godechot, Olivier
    Abstract: Throughout the long postwar period, crisis was a conjectural phenomenon and the exception in a normalcy of growth and social progress. Many key concepts of the social sciences - indeed, our understanding of democracy, embedded markets, enlightened electorates, benevolent political elites, and problem-solving progressive alliances - seem inapt for understanding today's societal upheaval. In the wake of the financial crisis of 2008, we have witnessed the breakdown of majority alliances, the return of populism on a grand scale both in the Western world and globally, and the eruption into chaotic and sometimes violent social protests. The forces that underpinned the framework of welfare capitalism seem obsolete in the face of financial and political elites who are paradoxically both disconnected from national territory and sometimes in direct alliance with nationalist and populist movements. Politics of resentment, politics of place, and new politics of class interact in ways that we do not yet understand. Perhaps the greatest paradox of all is that neoliberalism has spawned authoritarianism. At the same time, these processes are not at all new, but must be put in the context of the socioeconomic and cultural cleavages produced by the shift to neoliberalism since the 1970s. The paper presents arguments by leading scholars in economic history, economic sociology, and political economy in brief thinknotes that were prepared for the MaxPo Fifth-Anniversary Conference on January 12 and 13, 2018, in Paris.
    Keywords: crisis,neoliberalism,elites,political economy,economic sociology
    Date: 2018
  8. By: Glennie Lauren Moore; Engelbert Stockhammer
    Abstract: Household debt is at a record high in most OECD countries and it played a crucial role in the recent financial crisis. Several arguments on the macroeconomic drivers of household debt have been put forward, and most have been empirically tested, albeit in isolation of each other. This paper empirically tests seven competing hypotheses on the macroeconomic determinants of household indebtedness together in one econometric study. Existing arguments suggest that residential house prices, upward movements in the prices of assets demanded by households, the income share of the top 1%, falling wages, the rolling back of the welfare state, the age structure of the population and the short-term interest rate drive household indebtedness. We formulate these arguments as hypotheses and test them for a panel of 13 OECD countries over the period 1993 - 2011 using error correction models. We also investigate whether effects differ in boom and bust phases of the debt and house price cycles. The results show that the most robust macroeconomic determinant of household debt is real residential house prices, and that the phase of the debt and house price cycles plays a role in household debt accumulation.
    Keywords: household debt, house prices, cycles
    JEL: E19 E21 R20
    Date: 2018–02
  9. By: Donato Masciandaro
    Abstract: The lecture notes describe different views in analysing the relationships between the central banking activities – i.e. monetary and banking policies – and the business cycle, using a modified workhorse AS AD model, in order to include in the simplest way uncertainty, expectations and the role of banking and finance, as well as the incentives of the policymakers. The bottom line is to show pedagogically that one size - i.e. a unique economic mainstream – doesn’t fit all – i.e. cannot explain different national and historical business cycles. Therefore it is necessary to know more than one macroeconomic views, and history, politics and empirics matters in disentangling the pros and cons of each of them.
    Date: 2018
  10. By: Mario Tonveronachi
    Abstract: In response to a proposal put forward by the European Commission for the regulation of sovereign bond-backed securities (SBBSs), Mario Tonveronachi provides his analysis of the SBBS scheme and attendant regulatory proposal, and elaborates on an alternative approach to addressing the problems that have motivated this high-level consideration of an SBBS framework. As this policy brief explains, it is doubtful the SBBS proposal would produce its intended results. Tonveronachi's alternative, discussed in Levy Institute Public Policy Briefs Nos. 137 and 140, not only better addresses the two problems targeted by the SBBS scheme, but also a third, critical defect of the current euro system: that is, it fosters national sovereign debt sustainability.
    Date: 2018–06
  11. By: Claude Diebolt (CNRS, BETA, University of Strasbourg Strasbourg, France); Michael Haupert (University of Wisconsin-La Crosse)
    Date: 2018
  12. By: Allcott, Hunt (New York University); Diamond, Rebecca (Stanford University); Dube, Jean-Pierre (University of Chicago)
    Abstract: We study the causes of "nutritional inequality": why the wealthy tend to eat more healthfully than the poor in the U.S. Using two event study designs exploiting entry of new supermarkets and households' moves to healthier neighborhoods, we reject that neighborhood environments have economically meaningful effects on healthy eating. Using a structural demand model, we find that exposing low-income households to the same food availability and prices experienced by high-income households would reduce nutritional inequality by only 9%, while the remaining 91% is driven by differences in demand. In turn, these income-related demand differences are partially explained by education, nutrition knowledge, and regional preferences. These findings contrast with discussions of nutritional inequality that emphasize supply-side issues such as food deserts.
    JEL: D12 I12 I14 L81 R20
    Date: 2018–01

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