nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒10‒21
eight papers chosen by
Karl Petrick
Western New England University

  1. Personal income distribution and progressive taxation in a neo-Kaleckian model: Insights from the Italian case By Barbieri Góes, Maria Cristina
  2. Wealth inequality and aggregate demand By Stefan Ederer; Miriam Rehm
  3. "The Impact of the Bank of Japan's Monetary Policy on Japanese Government Bonds' Low Nominal Yields" By Tanweer Akram; Huiqing Li
  4. Individual Behavior and Collective Action: The Path to Iceland's Financial Collapse By Thorvaldur Gylfason; Gylfi Zoega
  5. Functional income distribution, capacity utilization, capital accumulation and productivity growth in Turkey: A post-Kaleckian analysis By Kurt, Ozan Ekin
  6. Calabresi: Heterodox Economic Analysis of Law By Alain Marciano; Giovanni Battista Ramello
  7. Applied history, applied economics, and economic history By Colvin, Christopher L.; Winfree, Paul
  8. Be Wary of Black-Box Trading Algorithms By Smith, Gary

  1. By: Barbieri Góes, Maria Cristina
    Abstract: This paper develops a stylized short-run neo-Kaleckian model incorporating personal income inequality and income taxes based on You and Dutt (1996). The main goal is to investigate how changes in income taxes and personal income distribution affect output growth. The theoretical discussion of the stylized model is then empirically assessed, using data for Italy retrieved from the Survey of Household Income and Wealth published by the Bank of Italy. The empirical analysis confirms both the heterogeneity of the propensities to consume of Italian households and the dominance of absolute income effects in the Italian consumer behavior that assures the negative trade-off between inequality and aggregate demand. More specifically, it is shown that, overall, Italians are still income constrained, not allowing for a compensation of the demand-depressing effects of raising inequality via debt and wealth-based consumption. Likewise, it is argued that decreasing personal income inequality via progressive income tax reforms would have positive effects on aggregate demand, utilization, and growth.
    Keywords: Income inequality,Personal Income Distribution,Income Taxes,Kaleckian model
    JEL: D11 D12 D31 E12 E21 H24
    Date: 2019
  2. By: Stefan Ederer (Austrian Institute of Economic Research (AT)); Miriam Rehm
    Abstract: The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch – in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time.
    Keywords: Wealth, Distribution, Aggregate Demand
    JEL: D31 D33 E12 E21 E25 E64
    Date: 2019–10
  3. By: Tanweer Akram; Huiqing Li
    Abstract: Nominal yields for Japanese government bonds (JGBs) have been remarkably low for several decades. Japanese government debt ratios have continued to increase amid a protracted period of stagnant nominal GDP, low inflation, and deflationary pressures. Many analysts are puzzled by the phenomenon of JGBs' low nominal yields because Japanese government debt ratios are elevated. However, this paper shows that the Bank of Japan's (BoJ) highly accommodative monetary policy is primarily responsible for keeping JGB yields low for a protracted period. This is consistent with Keynes's view that the short-term interest rate is the key driver of the long-term interest rate. This paper also relates the BoJ's monetary policy and economic developments in Japan to the evolution of JGBs' long-term interest rates.
    Keywords: Japanese Government Bonds; Long-Term Interest Rates; Nominal Bond Yields; Monetary Policy; Bank of Japan; John Maynard Keynes
    JEL: E43 E50 E58 E60 G10 G12
    Date: 2019–10
  4. By: Thorvaldur Gylfason; Gylfi Zoega
    Abstract: Unsustainable accumulation of debt precedes financial crises. The recent Western financial crisis was no exception in this regard. The external debt of Greece, Iceland, Ireland, and Spain increased exponentially, in Iceland at a rate higher than the rate of interest on foreign debt. The Ponzi scheme that played out in Iceland begs the question why a country would set out on a path that could lead to a financial crisis. We address this question and describe the private incentives faced by bankers, financiers, politicians and others. In particular, we show how private incentives and a culture that valued financial gains above all else collided with socially desirable outcomes. The root of the problem in Iceland as well as in other crisis countries was a failure at the state level to align private incentives with what was socially prudent, a failure due, at least in Iceland, to a combination of mistakes, incompetence and what can only be called corruption. Furthermore, misplaced belief in a market economy where morals and ethics play no role paved the way to serious lapses in accounting and in the operation of the banks.
    Keywords: financial crises, corruption, culture, Iceland, quality of governance, rent seeking
    JEL: E44 G01
    Date: 2019
  5. By: Kurt, Ozan Ekin
    Abstract: The aim of this article is to examine the relation between functional income distribution, capacity utilization, capital accumulation and productivity in Turkey by identifying demand and overall regimes prevalent in the economy. For that purpose, we conduct an empirical analysis using different specifications of the post-Kaleckian model of Hein and Tarassow (2010). Depending on the specification employed, empirical findings point at two types of demand and overall regimes that might be prevailing in Turkey. In case of an intermediate demand regime along with a type of intermediate overall regime, pro-labor policies lead to an increase in the rates of capacity utilization and productivity growth, but a decline in the rate of accumulation. However, if a profit-led demand regime accompanied with an expansive overall regime rules, these policies are expected to lead to a fall in all these three variables. The findings show that, independent of specification, a higher profit share has a positive impact on the rate of accumulation; however, the effects on the rates of capacity utilization and productivity growth vary in sign and magnitude, though the latter are less than unity in absolute value. The article contributes to the literature by being the first study that simultaneously identifies demand and overall regimes of an economy.
    Keywords: Functional income distribution,growth,post-Keynesian economics,Turkey
    Date: 2019
  6. By: Alain Marciano (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Giovanni Battista Ramello (Università degli Studi del Piemonte Orientale-Amedeo Avogadro (ITALY))
    Abstract: Guido Calabresi is one of the founders of the law and economics movement. His approach, however, corresponds to a form of economic analysis of law that, we claim, is heterodox. We show why in this short notice.
    Date: 2018–08–13
  7. By: Colvin, Christopher L.; Winfree, Paul
    Abstract: As a new field of academic enquiry, applied history has a unique opportunity to learn lessons from other applied fields. In this essay, we set out how we think applied historians can learn from the mistakes of applied economists and economic policymakers in their use, and abuse, of economic theory and economic history. What we call the New Applied History has the potential to improve the way policymaking is conducted. But only if its practitioners understand the power, and limitations, of theory. We apply our ideas to the case of budgetary policymaking in the United States.
    Keywords: applied history,budgetary policy
    JEL: B15 B22 E12 E63 N12 N41
    Date: 2019
  8. By: Smith, Gary (Pomona College)
    Abstract: Black-box algorithms now account for nearly a third of all U. S. stock trades. It is a mistake to think that these algorithms possess superhuman intelligence. In reality, computers do not have the common sense and wisdom that humans have accumulated by living. Trading algorithms are particularly dangerous because they are so efficient at discovering statistical patterns—but so utterly useless in judging whether the discovered patterns are meaningful.
    Keywords: algorithmic trading, black box trading, quants, artificial intelligence
    Date: 2019–01–01

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