nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒05‒27
nine papers chosen by
Karl Petrick
Western New England University

  1. Investment, Autonomous Demand and Long Run Capacity Utilization: An Empirical Test for the Euro Area By Ettore Gallo
  2. Fiscal policy and ecological sustainability: A post-Keynesian perspective By Yannis Dafermos; Maria Nikolaidi
  3. "Global Imbalances and the Trade War" By Jan Kregel
  4. Sectoral Composition of Output and the Wage Share: a Two-Sector Kaleckian Model. By Elton Beqiraj; Lucrezia Fanti; Luca Zamparelli
  5. Aspectos Distributivos do Crescimento Econômico: Uma Breve Síntese Teórica By Breno Nahuel Freneau; Sérgio Fornazier Meyrelles Filho
  6. Military Expenditure, Investment and Growth By J. Paul Dunne; Ron P Smith
  7. Secular Stagnation and Income Distribution Dynamics By David Kiefer, Ivan Mendieta-Munoz, Codrina Rada, Rudiger von Arnim
  8. Is Germany a mercantilist state? The dispute over trade between Berlin and Washington under Merkel and Trump By Pierre Baudry
  9. MINE – Mapping the Interplay between Nature and Economy. A digital gateway to the foundations of Ecological Economics By Faber, Malte; Petersen, Thomas; Frick, Marc; Zahrnt, Dominik

  1. By: Ettore Gallo (Department of Economics, New School for Social Research)
    Abstract: This paper reviews and empirically tests the validity and policy conclusions of the Sraffian Supermultiplier model (SSM) and the modified Neo-Kaleckian model after the inclusion of autonomous components of aggregate demand. First, we theoretically assess whether the SSM may constitute a complex variant of the Neo-Kaleckian model. In this sense, it is shown that results compatible with the SSM can be obtained by implementing a set of mechanisms in a modified Neo-Kaleckian model. Second, the paper empirically tests the main implications of the models in the Euro Area, based on Eurostat data. In particular, the discussion outlines the short and long-run relation between autonomous demand and output, by testing cointegration and causality with a VECM model. Moreover, the role accounted by both theories to the rate of capacity utilization is empirically assessed, through a time-series estimation of the Sraffian and Neo-Kaleckian investment functions. While confirming the theoretical relation between autonomous demand and output in the long run, the results show that capacity utilization still plays a key role in the short-run adjustment mechanism. Therefore, admitting that Keynesian results may hold even after the traverse, our work suggests to be Kaleckian in the short run and Sraffian in the long run.
    Keywords: Distribution, effective demand, Eurozone, growth, Neo-Kaleckian, Sraffian, Supermultiplier
    JEL: B51 E11 E12 O41 O47 O52
    Date: 2019–05
  2. By: Yannis Dafermos; Maria Nikolaidi
    Abstract: Fiscal policy has a strong role to play in the transition to an ecologically sustainable economy. This paper critically discusses the way that green fiscal policy has been analysed in both conventional and post-Keynesian approaches. It then uses a recently developed post-Keynesian ecological macroeconomic model in order to provide a comparative evaluation of three different types of green fiscal policy: carbon taxes, green subsidies and green public investment. We show that (i) carbon taxes reduce global warming but increase financial risks due to their adverse effects on the profitability of firms and credit availability; (ii) green subsidies and green public investment improve ecological efficiency, but their positive environmental impact is partially offset by their macroeconomic rebound effects; and (iii) a green fiscal policy mix derives better outcomes than isolated policies. Directions for future heterodox macroeconomic research on the links between fiscal policy and ecological sustainability are suggested.
    Keywords: post-Keynesian economics, ecological economics, green fiscal policy, stock-flow consistent modelling
    JEL: E12 E62 Q54 Q57
    Date: 2019–05
  3. By: Jan Kregel
    Abstract: Against the background of an ongoing trade dispute between the United States and China, Senior Scholar Jan Kregel analyzes the potential for achieving international adjustment without producing a negative impact on national and global growth. Once the structure of trade in the current international system is understood (with its global production chains and large imbalances financed by international borrowing and lending), it is clear that national strategies focused on tariff adjustment to reduce bilateral imbalances will not succeed. This understanding of the evolution of the structure of trade and international finance should also inform our view of how to design a new international financial system capable of dealing with increasingly large international trade imbalances.
    Date: 2019–05
  4. By: Elton Beqiraj (Department of Economics and Law, Sapienza University of Rome (IT).); Lucrezia Fanti (National Institute for Public Policy Analysis (INAPP).); Luca Zamparelli (Department of Economics and Law, Sapienza University of Rome (IT).)
    Abstract: This paper looks at structural change as one additional source of decline in the wage share. First, we provide a decomposition of changes in aggregate wage shares into changes due to variations in output composition and in sectoral wage shares for nine OECD countries between 1977 and 2010. We show that the rise in the service sector is a relevant factor in explaining the fall of the wage share, at least for some countries. Next, we develop a two-sector Kaleckian growth model consisting of the service and manufacturing sectors. We assume that structural change is exogenous as it arises from a shift in consumers' preferences or in the saving rate. We show that, when mark-ups are relatively higher in the service sector, a shift in the sectoral composition of demand in favor of the service sector good generates a rise in the profit share.
    Keywords: structural change, functional income distribution, manufacturing, service.
    JEL: D33 E11 O14
    Date: 2019–05
  5. By: Breno Nahuel Freneau (PPE/FACE-UFG); Sérgio Fornazier Meyrelles Filho (PPE/FACE-UFG)
    Abstract: This paper seeks to explore and present, through a synthesis of economic theory, some of the major approaches to the study of income distribution in the context of macroeconomic growth. The starting point is a survey of the classical economic school of thought, classified between the Ricardian and Marxian schools, which predicts a causality from income distribution towards economic growth. The role of a profit squeezing trend upon long term stagnation theorized by the classics is highlighted. Next, the characteristics of the Harrod-Domar model are studied, as well as its main concern, the problem of Harrodian instability. This problem refers to a discrepancy between the equilibrium rate of growth and the rates effectively determined by the factors of production. The importance of this topic lies in the fact that it is approached differently by subsequent authors discussed. Following, some of the elements of neoclassical income distribution and economic growth are discussed, in light of the Harrodian problem. In this sense, distribution is related to the neoclassical pricing system, meanwhile growth is explained by the accumulation of factors of production, according to a production function defined by full factor substitutability. This encumbers the use of the neoclassical structure to support any hypothesis of a relationship between distribution and growth, since these variables are determined in different models and are, therefore, exogenous to one another. On the other hand, post-Keynesian approaches are emphasized, once they predict a relationship between distribution and growth by endogeneizing the equilibrium rate of growth originally introduced by the Harrod-Domar model. These schools of economic thought, cathegorized as Kaldorian-Robinsonian and Kaleckian-Steindlian, being this last one also sorted among the Rowthorn-Dutt and Bhaduri-Marglin models, are finally presented.
    Keywords: History of economic thought, Income distribution, Economic growth
    JEL: B10 O15 O40
    Date: 2018–12
  6. By: J. Paul Dunne (School of Economics, University of Cape Town); Ron P Smith (School of Economics, University of Cape Town)
    Abstract: This paper considers the issues involved in estimating the effect of military expenditure on growth and the reasons for the lack of consensus in the literature. It briefly reviews the economic theory, emphasising the difficult identification issues involved in determining the interaction between military expenditure and output and discusses econometric methods for panels. It then takes advantage of the extended SIPRI military spending to construct a relatively large balanced panel of countries for the period 1960-2014. Rather than the usual focus on the direct relation between military spending on growth, it focusses upon the investment channel. It provides estimates of various models examining the interaction between the three variables and finds that the data do not suggest any strong relations between military expenditure and either investment or growth. This is not unexpected given the theoretical and econometric problems identified.
    Date: 2019
  7. By: David Kiefer, Ivan Mendieta-Munoz, Codrina Rada, Rudiger von Arnim
    Abstract: This paper contributes to the literature on secular stagnation by estimating a measure of potential output growth for the post-war US economy derived from a novel model specification that allows for the cyclical interactions between income distribution, represented by the trajectory of the labor share of income, and economic activity, as measured by capacity utilization. The results obtained show that potential output growth exhibits a gradual decline that predates the Great Recession and follows the downward trajectory of the labor share of income, thus suggesting the existence of an important long-run relationship between income distribution and output growth in the USA.
    Keywords: Potential output growth, capacity utilization, income distribution, labor share, US economy.
    JEL: B50 E12 E25 O40
    Date: 2019
  8. By: Pierre Baudry (GSRL - Groupe Sociétés, Religions, Laïcités - EPHE - École pratique des hautes études - CNRS - Centre National de la Recherche Scientifique, Université de Tours, PSL - PSL Research University)
    Abstract: Abstract: Mercantilism is certainly one of the oldest concepts of political economy. However, its use to describe pre-liberal and pre-industrial Western capitalism has been highly disputed due to the apparent vagueness of its definition. This paper tackles this issue by developing a historical vision of mercantilism, which rests on a heuristic ideal-type. My goal is to developed mercantilism as a complementary concept to Kindelberger's of Hegemonic Stability Theory. The pro-free-trade ‘benevolent hegemon' goes hand in hand with mercantilist states, which need a high level of good export and capital import. The question is then to understand two forms of mercantilism: I call the first one ‘early capitalism', which is typical for developing countries, while ‘late mercantilism' is to be found among aging and developed countries, which maintain a mercantilist policy. Empirically, I focus on Germany's economy since 1945 to illustrate and test this conceptual distinction. I intend to show that West Germany has been an ‘early mercantilist' power and benefited from the much-needed help by the USA after WWII, while it appears more and more as ‘late mercantilist' power since the 2000s. This empirical case shall help illustrate my general framework and shed light on the structural reasons for the disputes over trade between Berlin and Washington under Donald Trump.
    Keywords: Keywords: Mercantilism,Hegemonic stability theory,free trade,Kindelberger,Merkel,Trump,USA,Germany,capitalism
    Date: 2019–04–27
  9. By: Faber, Malte; Petersen, Thomas; Frick, Marc; Zahrnt, Dominik
    Abstract: MINE – Mapping the Interplay between Nature and Economy is a digital archive and visual map showing the intersection between nature and economy. By focusing on the interconnections between fundamental concepts e.g. of time, thermodynamics, evolution, responsibility and justice, a new concept of economic activity emerges within nature. This leads to new interpretations of current ecological, social and economic problems and, in addition, to an in-depth understanding of the modes of thought and policy needed to find sustainable solutions. On the most fundamental level, the dominant view of Mainstream Economics, which considers nature as part of the economy, Ecological Economics amends this view by the perspective that the economy in its physical side is seen as part of nature. Thus, Ecological Economics complements the strengths of Mainstream Economics on a practical level by interdisciplinary research highlighting, spots which do not receive the attention, by Mainstream Economics, they deserve. The research project that ultimately launched MINE began in the 1970s at the University of Heidelberg, conducted by an interdisciplinary group of scientists around Malte Faber, mainly economists, mathematicians, philosophers and physicists. It has contributed and can be broadly linked to the field of Ecological Economics. MINE digitally summarizes the experiences of this research and the accompanying policy-advising in Germany, the European Union, the US and China. It gives a web-based access to its publications and shapes new networks for scientists, students and practitioners. Following the Introduction (Section 1), this paper explains the MINE project (Section 2) and introduces our methodology (Section 3). In Section 4, we outline 15 concepts and heuristics for tackling the environmental problem. Finally, we provide an outlook for further work (Section 5).
    Keywords: Environmental Economics; Ecological Economics; History of Economic Thought; Homo Oeconomicus; Homo Politicus; Thermodynamics; Joint Production; Time; Irreversibility; Evolution; Ethics; Sustainability; Responsibility; Ignorance; Absolute and Relative Scarcity; Methodology; Interdisciplinarity
    Date: 2018–12–05

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