nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒10‒15
twelve papers chosen by
Karl Petrick
Western New England University

  1. The paradox of tax competition: Effective corporate tax rates as a determinant of foreign direct investment in a modified neo-Kaleckian model By Woodgate, Ryan
  2. Brexit: The lure of the Neoliberal Thought Collective By Jens Hoelscher; Peter Howard-Jones
  3. Methods and Concepts in Economic Complexity By Andres Gomez-Lievano
  4. "Unconventional Monetary Policies and Central Bank Profits: Seigniorage as Fiscal Revenue in the Aftermath of the Global Financial Crisis" By Joerg Bibow
  5. Structural conditions for currency internationalisation: International finance and the survival constraint By Angrick, Stefan
  6. Bringing the helicopter to ground: a historical review of fiscal-monetary coordination to support economic growth in the 20th century By Josh Ryan-Collins; Frank van Lerven
  7. Economic Policy in a Recession. Lessons from the Past By Gerald Roy Steele
  8. Food Insecurity, Poverty, Unemployment and Obesity in the United States: Effect of (Not) Considering Back-Door Paths in Policy Modeling By Dharmasena, Senarath; Bessler, David A.
  9. A Graham-type Trade Model with Keynesian Unemployment: Simultaneous Determination of International Values, Wage Rates, and Employment Quantities By Hideo Sato
  10. The Great Recession and Mental Health: the Effect of Income Loss on the Psychological Health of Young Mothers By Fiona Kiernan
  11. A comparative institutional approach to co-operative self-finance: locked assets, divisible and indivisible reserves By Ermanno C., Tortia
  12. The Stockholm School in a New Age – Erik Lundberg and the Swedish Model By Erixon, Lennart

  1. By: Woodgate, Ryan
    Abstract: After demonstrating the empirical relevance of tax competition effects across OECD countries, we incorporate such effects into a Kaleckian model. Corporate tax rates are seen as affecting investment by the effect on the location of multinational enterprise (MNE) investment, not on the total size of worldwide MNE investment. Hence, unlike the neoclassical approach, in our analysis investment is not driven by tax rates affecting the cost of capital, which is objectionable from a post-Keynesian perspective. With this locational qualification in place, we augment a traditional neo-Kaleckian model with the effects of MNE investment and determine under what conditions a country's policymakers can stimulate demand by raising corporate tax rates (via the usual Kaleckian redistribution channel) or lowering tax rates (via the tax competition FDI channel). The result of this exercise shows that our model predicts countries of small economic size will be more likely to engage in tax competition. Moreover, if the usual Keynesian stability condition holds, we can show that the effect of higher corporate tax rates on demand is much more likely to be negative than positive. To see how an interdependent world system of corporate tax rates may interact and develop over time, we use a procedural-based simulation approach using the conditions derived from our modified neo-Kaleckian model to inform the behavioural rules of our simulated policymakers. The simulations show a propensity of corporate tax rates around the world to convergence and to fall in systems with realistic parameter ranges, offering an explanation for the empirical phenomenon of the so-called "race to the bottom" in corporate tax rates. The "bottom" is shown within our model to be a bad equilibrium, from which tax coordination is proposed as a means of escape.
    Keywords: tax competition,Kalecki,multinational enterprises,race to the bottom,simulation,foreign direct investment,policy coordination
    JEL: E11 E12 E62 F55 H25
    Date: 2018
  2. By: Jens Hoelscher (Department of Accounting, Finance and Economics, Bournemouth University); Peter Howard-Jones (Department of Accounting, Finance and Economics, Bournemouth University)
    Abstract: The neoliberal agenda has polarised societies and in consequence, the choices facing the UK electorate range from neoliberalism to left wing socialism. Empirical evidence already exists on the measurable effect of the increasing dominance of the neoliberal wing of the Conservative party, indicating the continuation of laissez faire, migration control, increasing inequality, a low tax low wage economy, stagnating income and deteriorating public services. The competing ideology will result in the nationalisation of the utilities and the railway system, the regulation of capital, necessitating some element of control to prevent flight, the deregulation of labour, increased taxation, particularly on corporations to repair the damage to infrastructure and public services, and provisions enacted to improve wealth distribution. Both these alternatives should be unappealing to the majority of the electorate. However, allied to the “first past the post†electoral system, in a post Brexit world, what has become the tribal nature of UK society will oscillate between two competing ideologies to the detriment of national welfare. The rationale for this phenomenon is little understood or accepted by the political elite. A plausible explanation is the cultural shift in progressive values towards a post industrial, technological, socially inclusive, multicultural society, built on increasing opportunities for tertiary education, which has threatened the perceived superiority of privilege enjoyed by the older post war generation of primarily white men.
    Keywords: European Union, Brexit; neoliberal; international production networks; imports; exports
    JEL: B E F G H
    Date: 2018–09
  3. By: Andres Gomez-Lievano
    Abstract: Knowhow in societies accumulates as it gets transmitted from group to group, and from generation to generation. However, we lack of a unified quantitative formalism that takes into account the structured process for how this accumulation occurs, and this has precluded the development of a unified view of human development in the past and in the present. Here, we summarize a paradigm to understand and model this process. The paradigm goes under the general name of the Theory of Economic Complexity (TEC). Based on it, we present a combination of analytical, numerical and empirical results that illustrate how to characterize the process of development, providing measurable quantities that can be used to predict future developments. The emphasis is the quantification of the collective knowhow an economy has accumulated, and what are the directions in which it is likely to expand. As a case study we consider data on trade, which provides consistent data on the technological diversification of 200 countries across more than 50 years. The paradigm represented by TEC should be relevant for anthropologists, sociologists, and economists interested in the role of collective knowhow as the main determinant of the success and welfare of a society.
    Date: 2018–09
  4. By: Joerg Bibow
    Abstract: This study investigates the evolution of central bank profits as fiscal revenue (or: seigniorage) before and in the aftermath of the global financial crisis of 2008-9, focusing on a select group of central banks--namely the Bank of England, the United States Federal Reserve System, the Bank of Japan, the Swiss National Bank, the European Central Bank, and the Eurosystem (specifically Deutsche Bundesbank, Banca d'Italia, and Banco de Espana)--and the impact of experimental monetary policies on central bank profits, profit distributions, and financial buffers, and the outlook for these measures going forward as monetary policies are seeing their gradual "normalization." Seigniorage exposes the connections between currency issuance and public finances, and between monetary and fiscal policies. Central banks' financial independence rests on seigniorage, and in normal times seigniorage largely derives from the note issue supplemented by "own" resources. Essentially, the central bank's income-earning assets represent fiscal wealth, a national treasure hoard that supports its central banking functionality. This analysis sheds new light on the interdependencies between monetary and fiscal policies. Just as the size and composition of central bank balance sheets experienced huge changes in the context of experimental monetary policies, this study's findings also indicate significant changes regarding central banks' profits, profit distributions, and financial buffers in the aftermath of the crisis, with considerable cross-country variation.
    Keywords: Central Bank Profits; Seigniorage; Financial Crisis; Unconventional Monetary Policy; Monetary and Fiscal Policy; Central Bank Capital; Helicopter Money; Cryptocurrencies; Bitcoin
    JEL: E41 E52 E58 E62 E65 G01
    Date: 2018–10
  5. By: Angrick, Stefan
    Abstract: This paper examines the relationship between currency internationalisation and economic structure. It argues that the hierarchical and asymmetric architecture of the international monetary system imposes a "survival constraint" upon non-centre countries that obliges them to generate net inflows of the international centre currency to finance their payment commitments. It outlines why management of this constraint has historically been associated with a development approach that prioritises exports and investment over domestic consumption. It is demonstrated how this development approach creates an economic structure that is subject to path dependence and network effects, which perpetuates the role of non-centre countries as users of the international currency and the role of centre countries as suppliers of the international currency. It is argued that currency internationalisation cannot be pursued in isolation of broader economic policy, but rather requires economic structural change, political mediation, and accommodative international economic structures. Specifically, raising the international profile of the Chinese renminbi requires rebalancing of the Chinese economy towards domestic demand, whereas the status of the US dollar is intimately intertwined with the international openness of the US economy.
    Keywords: international currency,international monetary system,economic structure,economic development,liquidity flows,survival constraint
    JEL: F02 F1 F33
    Date: 2018
  6. By: Josh Ryan-Collins; Frank van Lerven (None)
    Abstract: In the face of the perceived high public and private debt levels and sluggish recovery that has followed the financial crisis of 2007-08, there have been calls for greater fiscal-monetary coordination to stimulate nominal demand. Policy debates have been focused upon the inflationary expectations that may be generated by monetary financing or related policies, consistent with New Consensus Macroeconomics theoretical frameworks. Historical examples of fiscal-monetary policy coordination have been largely neglected, along with alternative theoretical views, such as post-Keynesian perspectives that emphasise uncertainty and demand rather than rational expectations. This paper begins to address this omission. First, we provide an overview of the holdings of government debt by both central banks and commercial banks as an imperfect but still informative proxy for fiscal-monetary coordination in advanced economies in the 20th century. Second, we develop a new typology of forms of fiscal-monetary coordination that includes both direct and less direct forms of monetary financing, illustrating this with case-study examples. In particular, we focus on the 1930s-1970s period when central banks and ministries of finance cooperated closely, with less independence accorded to monetary policy and greater weight attached to fiscal policy. We find a number of cases where fiscal-monetary coordination proved useful in stimulating economic growth, supporting industrial policy objectives and managing public debt without excessive inflation.
    Keywords: monetary policy, monetary financing, inflation, central bank independence, fiscal policy, debt, credit creation
    JEL: B22 B25 E02 E12 E31 E42 E51 E52 E58 E63 N12 N22 O43
    Date: 2018–10
  7. By: Gerald Roy Steele
    Abstract: When an economy drops suddenly into recession, the paramount objective of any policy initiative is to avoid deflation. To that end, quantitative easing has little to offer. Arguments from the 1930s are assessed within the context of the recent Global Financial Crisis, where the preceding twenty years of the Great Moderation had left economists high on hubris. In avoiding their deserved comeuppance, economists continue to parade an ever-more sophisticated intertwining of statistical data within mathematical relationships that is essentially divorced from social and political relevance. Though sorely needed, the broad strokes of a politico-historical perspective are rarely found within the purview of current mainstream economics.
    Keywords: Central Banking, Deflation, Keynes, Simons Sovereign debt
    JEL: B31 E58 H63
    Date: 2018
  8. By: Dharmasena, Senarath; Bessler, David A.
    Abstract: The causes and consequences of food environment factors such as food insecurity, poverty, unemployment and obesity in the United States are complex. Once causality patterns with regards to these variables are identified, it is important to recognize front-door (Pearl, 2000) and back-door paths (Pearl, 2000) associated with these variables to make sensible and credible policy decisions. These policy interventions are known as performing do-Calculus (Pearl 2000, Spirtes et al., 2000) in causality literature. In this study we use the complex interactions of four food environment variables in the United States (food insecurity, poverty, unemployment and obesity) estimated using artificial intelligence and directed acyclic graphs by Dharmasena, Bessler and Capps (2016) and perform several policy interventions, recognizing front-door and back-door paths. Such policy simulations are vital for agencies not only to design appropriate policies for food assistance, poverty alleviation, combating food insecurity and obesity, but also to recognize effects of policy prior to the desired intervention. Preliminary analysis shows that there are two front-door paths from income to food insecurity, via poverty and via unemployment. Also, there is a front-door path from poverty to food insecurity, while there is an important back- door path from poverty to food insecurity via unemployment.
    Keywords: Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Health Economics and Policy, Research Methods/ Statistical Methods
    Date: 2018–01–16
  9. By: Hideo Sato
    Abstract: This paper provides a Graham-type trade model with Keynesian unemployment. In the real world, the existence of unemployment, the greater part of which is involuntary, is a normal state. Nevertheless, many of the conventional trade models assume full employment. Although there is a literature which focuses on the relations between international trade and unemployment, the unemployment dealt with in the literature is voluntary in the almost cases. In our model, involuntary unemployment or Keynesian unemployment occurs. Though labor endowments are given, full employment is not presupposed. Rather, employment quantities are determined simultaneously with international values and wage rates.
    Date: 2018–01
  10. By: Fiona Kiernan (School of Economics & Geary Institute, University College Dublin)
    Abstract: There is little consensus as to the effect of recessions on health, which may be due to the heterogenous nature of recessions, the choice of health outcome or the description of the independent variable involved. In contrast to previous work, which has predominantly studied labour market loss, I examine the relationship of income loss and health, and in particular focus on psychological rather than physical health. I study disposable income loss because disposable income is related to consumption expenditure, and therefore satisfaction. Psychological, rather than physical, health is important because younger populations are unlikely to manifest clinical evidence of recession-related disease in the short term. The Irish recession provides me with an opportunity to study the effect of changes in income, since households who remained in employment also experienced changes in disposable income. Using panel data from three waves of the Growing Up in Ireland study, I find that income loss is associated with an increase in depression, but not in parental stress. This effect of income loss is seen for those who are home owners, and subjective reports of being in mortgage or rent arrears is also associated with an increase in depression score.
    Date: 2018–10–09
  11. By: Ermanno C., Tortia
    Abstract: This paper approaches from a law and economics perspective the problem of self-financed accumulation of capital in co-operative enterprises. Different existing and past institutional systems are discussed and lessons drawn on how to improve existing institutional structures. Divisibility and indivisibility of self-financed capital reserves, as they can pave the way to improved systematic solutions, in co-operatives are used as heuristic ports of entry in the discussion. In this, institutional evolution is interpreted as a trial and error and open-ended process. National and regional institutional systems (especially the Italian, the Spanish and the former Yugoslav ones) are considered and evaluated in terms of strengths and weaknesses to extrapolate new institutional solutions that would allow to overcome well-known weaknesses in co-operatives’ financial structure. A nested system of self-financed divisible and indivisible reserves of capital is proposed. Different typologies of reserves would serve different aims and functions in the working of the capital structure of the co-operative enterprise, especially balancing patrimonial stability, allocative efficiency, members’ financial involvement and performance. Correct legal regulation plays a fundamental role in steering the survival and reproduction potential of the co-operative system.
    Keywords: co-operative enterprises; accumulation of capital; divisible reserves; indivisible reserves; horizon problem; open-ended institutional evolution
    JEL: B51 B52 J54 P26 P34
    Date: 2018–09–21
  12. By: Erixon, Lennart (Dept. of Economics, Stockholm University)
    Abstract: The Stockholm-school member Erik Lundberg is the economist who devoted most attention to the economic theory and policy of the Swedish postwar model. The established view is that Lundberg was a steadfast opponent of the so-called Rehn- Meidner model, an economic and wage policy program developed by two Swedish trade-union economists in the early postwar years. The model recommends fiscal policies in the medium term, extensive labor market programs and wage policies of solidarity to simultaneously obtain price stability, full employment, income equality and high growth. This article maintains that Lundberg shared many of the premises of the Rehn-Meidner model already at the beginning of his debate with Gösta Rehn in the early 1950s. Furthermore, in their debate, Lundberg approached Rehn’s policy program and underlying theory of the working of the Swedish economy. Despite his ideological qualms, Lundberg’s ambiguous attitude to the Rehn-Meidner model turned into a complete adoption of the model in the 1960s. By highlighting the innovative nature of the Rehn-Meidner theory, Lundberg also correctly downplayed the impact of the Stockholm School.
    Keywords: Swedish model; Rehn-Meidner model; Stockholm School; Economic policy; Wage policy of solidarity; Labor-market policy
    JEL: B25 E31 E62 J23 J61 O43
    Date: 2018–09–21

This nep-pke issue is ©2018 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.