nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒12‒03
fourteen papers chosen by
Karl Petrick
Western New England University

  1. Varieties of capitalism and growth regimes: the role of income distribution By Jan Behringer; Till van Treeck
  2. Revisiting debt-led and export-led growth models: a sectoral balances approach By Jan Behringer; Till van Treeck
  3. Introduction to Michel Husson's 'Value and price: a critique of neo-Ricardian claims' By Freeman, Alan
  4. Some new insights on the empirics of Goodwin’s growth-cycle model By Ricardo A. Araújo; Marwil J. Dávila-Fernández
  5. Financialisation, financial development, and investment: evidence from European non-financial corporations By Tori, Daniele; Onaran, Özlem
  6. Financialization and Inequality in Coordinated and Liberal Market Economies By Evelyne Huber; Bilyana Petrova; John D. Stephens
  7. A Note on Krugman's Liquidity Trap By Stefano Di Bucchianico
  8. New Technologies, Global Value Chains, and the Developing Economies By Dani Rodrik
  9. Inequality as experienced difference: A reformulation of the Gini coefficient By Bowles, Samuel; Carlin, Wendy
  10. Book review: till time's last sand: a history of the Bank of England, 1694-2013 by David Kynaston By Goodhart, Charles
  11. What has the resistant theory ignored? A study at the function of joy for working class students to cope with the oppressed structure of the classroom By Tien-Hui Chiang; Qian Zhou
  12. Lessons from the money mania for money creation By Guo, Yanling
  13. Social equity and ecological sustainability: Can the two be achieved together? By Kopp, Thomas; Dorn, Franziska
  14. Corporate governance By Lehmann, Erik

  1. By: Jan Behringer; Till van Treeck
    Abstract: This article brings together the varieties of capitalism and the growth model approaches to comparative political economy to analyse the macroeconomic implications of changes in income distribution. In the decades before the financial crisis, coordinated market economies (CMEs) and liberal market economies (LMEs) developed different but unsustainable growth models which resulted in global current account imbalances. We analyse the relative importance of wage coordination and income distribution in explaining the emergence of global imbalances. We argue that strongly rising top income shares contributed to the decline in household saving and current account imbalances in major LMEs, whereas pronounced falls in the wage share contributed to the weakness of domestic demand and rising current account balances in CMEs. Wage coordination affected current account imbalances both directly and, more importantly, indirectly through its effects on income distribution. We test the argument for a sample of 18 industrialized countries over the period 1981-2007.
    Keywords: Functional income distribution, personal income distribution, wage coordination, varieties of capitalism, growth models
    Date: 2018
  2. By: Jan Behringer; Till van Treeck
    Abstract: In this paper, we revisit the macroeconomic foundations and political economy of national growth models. We challenge the Kaleckian framework underpinning the emergent growth model literature in comparative political economy, which focuses primarily on the functional income distribution (wages versus profits), while ignoring personal income distribution (inequality across private households). Using the examples of the "export-led" and "debt-led" growth models of Germany and the United States, we show how institutional differences can help explain why different countries developed different patterns of income distribution and how income distribution and institutions interacted to generate financial imbalances in different sectors of the economy (i.e., the private household sector, the private corporate sector, and the government sector).
    Keywords: Growth models, financial balances, functional income distribution, personal income distribution, institutions
    JEL: D3 J5 P5
    Date: 2018
  3. By: Freeman, Alan
    Abstract: This is a prepublication version of the published article of the same name and should be cited as "Freeman, A. 2018. Introduction to Michel Husson's 'Value and Price: a critique of neo-Ricardian Claims' Capital and Class Vol 42, Issue 3, 2018, pp 509-516" Michel Husson originally published this landmark article in French as Manuel Perez (1980). It thus offers a new generation of Marx scholars a resource which academic Marxism has rejected, except for a minority tradition in which this article played a foundational role: the opportunity to understand, and grapple with, Marx’s own economics. This introduction aims to explain, to such new readers, the key role which Husson’s article played in advancing our understanding of Marx’s theory of value. It appeared nine years after Paul Samuelson (1971) pronounced Marx’s value theory a failure, and three years after English Marxist Ian Steedman (1977) formally endorsed this verdict. Husson set out the first, and in many ways the most comprehensive concise rebuttal of these claims.
    Keywords: Value, Marx, TSSI
    JEL: B14 B24 C00
    Date: 2017–09–14
  4. By: Ricardo A. Araújo; Marwil J. Dávila-Fernández
    Abstract: Vector Autoregressive (VAR) models have been used for a long time now to study profit-squeeze cycles, most of the time using problematic Hodrick-Prescott (HP) filtered time series. In a recent paper, Hamilton (2018) has provided a simple alternative that overcomes the main drawbacks of the HP procedure. In order to evaluate the empirical relevance of the profit-squeeze mechanism, we compare both methodologies using quarterly data for the United States from 1948-67 to 2016. Furthermore, we present an extension of Goodwin's (1967) growth-cycle model that includes employment rates, income distribution, and capacity utilisation as endogenous variables. We show analytically that the system always admits a family of periodic solutions. The model is estimated econometrically using the Autoregressive Distributed Lag (ARDL) approach. Through numerical simulations and making use of our estimations, we confirm that fluctuations are persistent and bounded.
    Keywords: Distributive cycles; Growth-cycle; HP ?lter; VAR; ARDL.
    JEL: E32 E64
    Date: 2018–11
  5. By: Tori, Daniele; Onaran, Özlem
    Keywords: financialisation; financial development; non-financial corporations; fixed investment; Europe
    JEL: E2 E21
    Date: 2018–11–09
  6. By: Evelyne Huber; Bilyana Petrova; John D. Stephens
    Abstract: The last three decades have witnessed rising inequality and deepening financialization (however defined) in post-industrial democracies. A rapidly growing body of literature has linked the two phenomena (see e.g. Dünhaupt 2014, Godechot 2016, Flaherty 2015, Roberts and Kwon 2017). Contrary to existing scholarship, which has largely neglected the mediating effect of institutions, we argue that contextual differences play a crucial role in shaping the relationship between financialization and inequality. Drawing on the Varieties of Capitalism literature, we posit that a larger financial sector is associated with a more unequal distribution of income in liberal market economies, where the industry develops substantial autonomy from other actors. In contrast, the stronger position of labor in coordinated market economies is able to counteract the inequality-enhancing effects of financialization. We test these hypotheses with data on 18 and 21 post-industrial democracies between 1960 and 2013. Our analysis is largely consistent with our expectations.
    Date: 2018–09
  7. By: Stefano Di Bucchianico (Department of Economics, Roma Tre University)
    Abstract: The 1998 stylized model of Krugman constituted a ground-breaking contribution explaining the long lasting Japanese stagnation as the consequence of a ‘liquidity trap’ situation featuring a negative natural interest rate. Our critique to such a proposal will focus on three aspects. First, we will question the logical structure of the model, providing an alternative interpretation of its closure. Second, we will argue that aggregate demand has no role in the explanation, as the cause for the persistent excess of savings over desired investment is the result of a supply side shock plus a financial rigidity on the nominal interest rate. Finally, we will discuss the restrictive assumptions needed to get a negative natural interest rate, the concept that lies at the foundation of the entire theoretical apparatus. Our conclusion is that the explanation offered within the 1998 contribution does not provide a satisfying rationale for the Japanese stagnation.
    Keywords: Liquidity trap, Japanese stagnation, natural interest rate
    JEL: E31 E40 E52 E58
    Date: 2018
  8. By: Dani Rodrik
    Abstract: Many of the exports of developing countries are channeled through global value chains (GVCs), which also act as conduits for new technologies. However, new capabilities and productive employment remain limited so far to a tiny sliver of globally integrated firms. GVCs and new technologies exhibit features that limit the upside and may even undermine developing countries’ economic performance. In particular, new technologies present a double whammy to low-income countries. First, they are generally biased towards skills and other capabilities. This bias reduces the comparative advantage of developing countries in traditionally labor-intensive manufacturing (and other) activities, and decreases their gains from trade. Second, GVCs make it harder for low-income countries to use their labor cost advantage to offset their technological disadvantage, by reducing their ability to substitute unskilled labor for other production inputs. These are two independent shocks that compound each other. The evidence to date, on the employment and trade fronts, is that the disadvantages may have more than offset the advantages.
    Keywords: GVCs, economic development, international trade
    JEL: O33 O40
    Date: 2018
  9. By: Bowles, Samuel; Carlin, Wendy
    Abstract: We represent a population as a complete undirected network, the edges of which are the fundamental data on experienced disparities. This yields a Gini coefficient (for wealth, say) for finite populations that is based on the mean wealth difference between all pairs of individuals relative to the mean wealth, which we demonstrate is not the case for the conventional Lorenz curve representation and the algorithm widely-used to calculate it. Our method also provides simple and intuitive explanations of the effects on the Gini coefficient of changes in the wage share, the employment rate, and other macroeconomic and demographic variables.
    Keywords: Gini coefficient; inequality; Lorenz curve; relative mean difference
    JEL: D31
    Date: 2018–09
  10. By: Goodhart, Charles
    JEL: F3 G3
    Date: 2018–12–01
  11. By: Tien-Hui Chiang (Academy of Globalization and Education Policy, Zhengzhou University); Qian Zhou (School of Education, Zhengzhou University)
    Abstract: The scholars of cultural reproduction have argued that the gap between the knowledge structure of school curriculum and the reasoning ability of working class students functions as the crucial element in impeding their academic achievements. For the researchers of the CCCS, such a failure tends to lead to the development of a counter-school culture. Working class people intend to maintain their collective identity through the strategy of self-decision, enabling them to reverse their dominated status in the power structure of capitalist society. Although the above theories spotlight the interaction between this student group and structural constraints, the structural-led approach makes these academics focus on the scope of defense mechanism triggered by coercively structural constraints and, in turn, the influence of individualized agency on such an interaction remains unknown. Agency may unleash them from the rigid linkage between structural imposition and passive obedience. Accordingly, this study was designed to explore how underachieving working students actively survived in classrooms.
    Keywords: underachieving working class students, cultural hegemony, counter-school culture, ceiling theory, structural constraint, agency
    Date: 2018–11
  12. By: Guo, Yanling
    Abstract: The first attempt in the human history to consciously create money ended in a collapse in 1720, well-known as the money mania. This unfortunate start raises doubt on money creation as a whole such that today there are still voices questioning created money even though it is now indispensible for the world economy. But this misfortune also has the bright side in that it delivers an extensive example of risks which created money has to consider. In this paper, I review the central facts from the money mania and highlight lessons we can still learn from it.
    Keywords: money mania,money creation,convertible money,non-convertible money,John Law,risk
    JEL: B19 E40 E59 N23
    Date: 2018
  13. By: Kopp, Thomas; Dorn, Franziska
    Abstract: Two of the greatest challenges facing societies today are the rapid deterioration of the natural environment as well as high levels of economic inequality. Policies addressing these two challenges are often designed independent of each other, neglecting their interconnected nature. Therefore, designing better policies requires a profound knowledge of this potential trade-off. Until now, however, the characteristics of this trade-off have remained unclear, as little empirical research is available. This paper fills this gap by conceptualizing the trade-off through a macroeconomic model and estimating it empirically. It is the first paper to develop a microeconomically-based model of consumption that includes two transmission channels of inequality on biosphere use: First, the income-effect refers to the non-linear, decreasing impact of rising incomes on consumption spending after subsistence needs are fulfilled, which leads to a negative correlation between levels of inequality and pollution levels. Second is the effect of conspicuous consumption, which can reverse the tendency towards increased pollution caused by the income-effect. The empirical application assesses which of these opposing mechanisms prevails. The model is estimated by the Group Fixed Effects estimator, based on an unbalanced panel of 167 countries over 33 years. To account for the multidimensionality of biosphere use it is measured by the disaggregated components of the Ecological Footprint. Results indicate that the income effect prevails over the conspicuous consumption effect, meaning that there is indeed a trade-off between reducing biosphere use and inequality levels. This means for policy makers that measures to reduce inequality need to be accompanied by policies that limit harmful environmental impacts of redistribution. Since three of the Ecological Footprint's sub-indices refer to food consumption, the analysis also yields interesting conclusions on the relationship between inequality and food security.
    Date: 2018
  14. By: Lehmann, Erik
    Abstract: Corporate governance is a recent concept that encompasses the costs caused by managerial misbehavior. Corporate governance is concerned with how organizations in general, and corporations in particular, produce value and how that value is distributed among the members of the corporation, its stakeholders. The interrelation of value production and value distribution links the ubiquitous technological aspect (the production of value) with the moral and ethical dimension (the distribution of value). Corporate governance is concerned with this link in general, but more specifically with the moral and ethical dimensions of distributing the generated value among the stakeholders. Value in firms is created by firm-specific investments, and the motivation and coordination of value enhancing activities and investment is protected by the power concentrated at the pyramidal top of the organization. In modern companies, it is the CEO and the top management deciding how to create value and how to distribute it among the relevant stakeholders. Due to asymmetric information and the imperfect nature of markets and contracts, adverse selection and moral hazard problems occur, where delegated (selected) managers could act in their own interest at the costs of other relevant stakeholders. Corporate governance is a two-tailed concept. The first aspect is about identifying the (most) relevant stakeholder(s), separating theory and practice into two different and conflicting streams: the stakeholder value approach and the shareholder value approach. The second aspect of the concept is about providing and analyzing different mechanisms, reducing the costs induced by moral hazard and adverse selection effects, and to balance out the motivation and coordination problems of the relevant stakeholders. Corporate governance is an interdisciplinary concept encompassing academic fields like finance, economics, accounting, law, taxation and psychology, among others. Like countries differ according to their institutions (i.e. legal and political systems, norms, and rules), firms differ according to their size, age, dominant shareholders or industries. Thus concepts in corporate governance differ along these dimensions as well. And while the underlying characteristics vary in time, continuously or as an exogenous shock, concepts in corporate governance are dynamic and static, offering a challenging field of interest for academics, policy makers and firm managers.
    Keywords: corporate Governance,principal agent theory,transaction costs,theory of the firm,moral hazard,adverse selection,managerial misbehavior,merger and acquisition,board of directors,remuneration
    JEL: G34 G20 L21
    Date: 2018

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