nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒05‒06
seven papers chosen by
Karl Petrick
Western New England University

  1. The political economy of the Eurozone crisis: competitiveness and financialization in PIIGS By Duman, Özgün Sarımehmet
  2. "Fiscal Stabilization in the United States: Lessons for Monetary Unions" By Plamen Nikolov; Paolo Pasimeni
  3. Corruption: Public and Private By Pellegrini Lorenzo; Luca Tasciotti
  4. Whither Economic History ? Between Narratives and Quantification By Pamfili Antipa; Vincent Bignon
  5. Aligning profit taxation with value creation By Wolfram F. Richter
  6. The Impact of Rental Housing on Neighborhood Racial and Social Integration By Ihlanfeldt, Keith; Yang, Cynthia Fan
  7. Distributive justice and social conflict in an AK model By Chris Tsoukis; Jun-ichi Itaya

  1. By: Duman, Özgün Sarımehmet
    Abstract: This paper analyses the fundamental reasons for the current global economic crisis in the Eurozone and PIIGS—Portugal, Italy, Ireland, Greece and Spain. It evaluates the tight economic integration within the Eurozone, and scrutinizes the reasons that PIIGS were more intensely exposed to the economic crisis. It focuses on the structure of the real economy and the financial market, and outlines the levels of competitiveness and financialization across the Eurozone and PIIGS. The paper states that the reason for the economic crisis in PIIGS was not only (i) unregulated financialization or over-financialization, but also (ii) the economic and trade imbalance among the Eurozone members, (iii) the falling rates of profit in the real economy, and (iv) the failure of real profits to compensate financial profits.
    Keywords: competitiveness; economic crisis; Eurozone; financialisation; financial market; PIIGS; real economy
    JEL: F3 G3
    Date: 2017–10–23
  2. By: Plamen Nikolov; Paolo Pasimeni
    Abstract: The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and the experience of a monetary union equipped with fiscal shock absorbers, such as the United States, has often been a reference. This paper enhances our knowledge about the degree of macroeconomic stabilization achieved in the United States through the federal budget, providing a detailed breakdown of the different channels. In particular, we investigate the relative importance and stabilization impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. The analysis shows that in the United States, corporate income taxes collected at the federal level are the single most efficient instrument for providing stabilization, given that even with a smaller size than other instruments they can provide important effects, mainly against common shocks. On the other hand, Social Security benefits and personal income taxes have a greater role in stabilizing asymmetric shocks. A federal system of unemployment insurance, then, can play an important stabilization role, in particular when enhanced by a discretionary program of extended benefits in the event of a large shock, like the Great Recession.
    Keywords: China; Monetary Union; Macroeconomic Stabilization; Fiscal Policy; Monetary Policy
    JEL: E63 F36 F41
    Date: 2019–04
  3. By: Pellegrini Lorenzo; Luca Tasciotti (Department of Economics, SOAS University of London, UK)
    Abstract: Corruption is recognised as a major stumbling block to development and is associated with injustice and abuse of power. The consensus on the detrimental effects of corruption stands in contrast with the lack of agreement on the set of phenomena that fall under the heading ëcorruptioní and there is little discussion on whether the economics of corruption should also include corruption in the private sector. This question is relevant since different foci will have different theoretical bases and policy ramifications. We analyse the issue from two complementary perspectives: whether the impacts of corruption are limited to corruption in the public sector and whether a large public sector is associated with more corruption. First, we review theoretical and empirical perspectives on corruption, showing how concern over corruption in the private sector has a long history, dating back to Marshall and Coase. Second, we analyse corruptionís determinants using a panel data approach. The econometric analysis demonstrates how our indicator of government involvement in the economy is a poor predictor of corruption prevalence. Finally, the paper highlights the policy implications of the one-sided focus on corruption in the public sector and proposes an explicit acknowledgment of the role of corruption in the private sector.
    Keywords: corruption, public sector, private sector, pooled analysis
    JEL: D7 H50 M20
    Date: 2019–03
  4. By: Pamfili Antipa (Département d'économie); Vincent Bignon (Banque de France)
    Abstract: Macroeconomic analysis is not just a game of equations; it is a narrative of the real. We argue in this article for a re-evaluation of the importance of narratives. Because each financial crisis is a unique event, the narrative is the natural form of analysis. In addition, the effects of economic policies can no longer be analysed independently of the narratives appropriated by economic agents (Schiller, 2017) and policy makers (Friedman and Schwartz, 1963). There is a twofold value in adding the historical dimension. Economic history is instructive by multiplying case studies, i.e. by increasing the variety of policy successes and failures analysed. History also loosens the shackles of our preconceptions, since comparing the past and present calls into question the exceptional nature of what we are living.
    Keywords: Economic history; Cliometrics; Narrative; Economic policy
    Date: 2018–09
  5. By: Wolfram F. Richter
    Abstract: The OECD seeks to align transfer pricing and profit taxation with value creation but fails to provide a clear definition. This paper argues that value creation requires international cooperation and that the profit tax base should therefore be allocated according to standards commonly considered as fair when distributing the surplus of cooperation. The claim that current rules of international profit taxation are aligned with value creation is rejected. If anything, the OECD’s objective suggests a tax system in which profits are split between the involved jurisdictions. This result triggers the question of possible implementation which is discussed in some detail.
    Keywords: international corporate income taxation, intellectual property, value creation, Shapley value, profit splitting
    JEL: H25 F23 M48
    Date: 2019
  6. By: Ihlanfeldt, Keith; Yang, Cynthia Fan
    Abstract: Neighborhood racial and class segregation continue to be major social problems within America’s metropolitan areas. Segregation has been linked to a whole host of racial and class inequalities, including access to jobs, schooling and single parenthood, and future earnings. One factor accounting for segregation is the inability of black and lower income households to afford housing in white neighborhoods, where housing units historically have been largely owner-occupied single-family homes. In recent years there has been a shift in the housing makeup of many of these neighborhoods, with rentals and foreclosures increasing in share. This has made housing more affordable in these neighborhoods. In this paper we investigate the impact that foreclosures and three types of rentals (single-family, condominium, and apartments) have on neighborhood racial and income integration using data from Miami-Dade County, Florida. We find that neighborhoods have become more racially and socially integrated as rentals have increased as a share of the housing stock.
    Keywords: racial segregation, income segregation, rental housing
    JEL: J15 R21 R23 R31
    Date: 2019–04–19
  7. By: Chris Tsoukis; Jun-ichi Itaya
    Abstract: We introduce distributive justice into a simple model of growth and distribution. Two groups (‘classes’) of otherwise identical, capital-rich and capital-poor individuals (‘capitalists’) and (‘workers’) are in conflict over factor (labour-capital) shares. Capitalists’ (workers’) ideal labour share is low (high) – but always tempered by the recognition that everyone supplies one unit of labour inelastically and desires a wage; and that the labour share impacts growth negatively in our ‘AK’ production economy. Social conflict is defined as the difference between the ideal labour shares of the two classes. This conflict is resolved by the two positive and three normative criteria we consider. Thus, the macroeconomy (growth, factor shares, distribution), social conflict and the methods of its resolution are jointly determined in a complete socio-economic equilibrium. We believe both this approach and our rich set of results are novel. We consider two positive (probabilistic voting and Nash bargaining, encapsulating electoral politics and socio-political bargaining) and two normative (justice) criteria (utilitarian and Rawlsian) of conflict resolution. Greater impatience, intensified status comparisons and negative consumption externalities, greater wealth inequality and a decline in productivity exacerbate social conflict. Status comparisons and wealth inequality tend to raise the labour share under all positive and normative criteria. Finally, we propose and analyse a criterion of ‘justice as minimal social friction’. Under the plausible assumption that the capitalists’ overall socio-political influence (numerical strength aside) is at least as high as that of workers, all positive methods imply a smaller labour share and more inequality than all our three criteria of distributive justice. We offer a numerical illustration of the key points.
    Keywords: growth, factor shares, status, distributive justice, social conflict, social contract
    JEL: O41 O43 E25 P16 Z13
    Date: 2019

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