nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒12‒20
ten papers chosen by
Karl Petrick
Western New England University

  1. "Still Flying Blind after All These Years: The Federal Reserve's Continuing Experiments with Unobservables" By Dimitri B. Papadimitriou; L. Randall Wray
  2. If public spending can be reinterpreted as public investment. Can public debt be reinterpreted as public asset? By Morgan, Robert
  3. The Old Institutional School and Labour Market Functions and Policies By Drakopoulos, Stavros A.; Katselidis, Ioannis
  4. "A Recovery for Whom? The Case of the Greek Tourism Sector" By Vlassis Missos; Nikolaos Rodousakis; George Soklis
  5. Varieties of Capitalism and re-thinking the East Asian model of economic growth after the Covid-19 pandemic: Rebalancing shareholder and stakeholder capitalism By Lee, Keun
  6. Economic Interests, Worldviews, and Identities: Theory and Evidence on Ideational Politics By Elliott Ash; Sharun Mukand; Dani Rodrik
  7. Capitalism needs a new social contract By Shafik, Minouche
  8. A Parsimonious Macroeconomic ABM for Labor Market Regulations By Caner Ates; Dietmar Maringer
  9. Industrialization in developing countries: is it related to poverty reduction? By Abdul A. Erumban; Gaaitzen de Vries
  10. Racial Discrimination and Housing Outcomes in the United States Rental Market By Peter Christensen; Ignacio Sarmiento-Barbieri; Christopher Timmins

  1. By: Dimitri B. Papadimitriou; L. Randall Wray
    Abstract: Institute President Dimitri B. Papadimitriou and Senior Scholar L. Randall Wray contend that the prevailing approach to monetary policy and inflation is influenced by a set of concepts that are a poor guide to action. In this policy brief, they examine two previous cases in which the Federal Reserve misread the data and raised rates too soon, as well as the evolution of the Fed's thought and practice over the past three decades--a period in which the central bank has increasingly turned to unobservable indicators that are supposed to predict inflation. Noting that their criticisms have now been raised by the Fed's own members and research staff, the authors highlight the ways in which we need to rethink our overall framework for monetary and fiscal policy. The Fed has far less control over inflation than is presumed, they argue, and, at worst, might have the whole inflation-fighting strategy backwards. Managing inflation, they conclude, should not be left entirely in the hands of central banks.
    Date: 2021–12
  2. By: Morgan, Robert
    Abstract: Since the Great Financial Crash (GFC) of 2008, there has been a great deal of soul searching and hand wringing when it comes to public debt. This collective anxiety over the national debt, government debt or public spending debt or whatever you choose to call it, all comes down to the same thing. The basic idea is that the government is broke, we are out of money and that cuts to benefits and public services, are not only desirable but necessary. Despite the fact that what started as aprivate sector crisis which saw the private banking sector being bailed out with billions of pounds in public money to avoid collapse, both politicians and economists rebranded this same crisis as a crisis of public spending. By any measure is a clever piece of sleight of hand worthy of any great magician. However this does raise the question, is this true? Do the poorest and most vulnerable in UK society, have to suffer for the actions of the very richest playing fast and loose with the economy? Can it be true that because a huge amount of public money has been given to secure the private profits of the banks, those at the bottom of society have to go without? In effect, are we saying that because the UK government has spent all its money on the richest in society, the government has nothing left for the poorest?
    Keywords: Government finances, Modern Monetary Theory, Great Financial Crash, seigniorage, Kelton, Mosler, Mitchell,
    JEL: H00 H50
    Date: 2021–11–15
  3. By: Drakopoulos, Stavros A.; Katselidis, Ioannis
    Abstract: The significant role of institutional and non-market factors in the functioning of an economic system was a core theme of the old institutional economists. They also criticised the narrow conception of economic welfare only in terms of efficiency and satisfaction of consumer interests. Instead, they focused on issues related to justice, human self-development and labourers’ welfare. Their conception of the labour market functions is an indicative example of the uniqueness of their approach. In contrast to the standard approach, labour market functioning does not depend only on the price mechanism, but is also affected by other key factors and parameters such as the social norms, several psychological factors and various labour institutions. This chapter seeks to examine and highlight the contribution of the old institutional economics towards labour market functions and policies. After presenting the origins and method of the School, it briefly compares old Institutionalism and early Neoclassical economics focusing on labour market issues. It also discusses the old institutional approach with respect to the collective action and labour market policy. The chapter concludes with Ross-Dunlop debate on labour unions and the case of minimum wages policy in order to emphasize the relevance of early institutional ideas in analysing contemporary labour market issues.
    Keywords: Institutional School; Economic Policy; Labour Policy; Labour Market Institutions
    JEL: B15 B25 J08
    Date: 2021
  4. By: Vlassis Missos; Nikolaos Rodousakis; George Soklis
    Abstract: The COVID-19 pandemic has revealed multiple risks faced by economies whose production structures depend on the volatility of international conditions. In the case of Greece, this has manifested itself in the severe impact the pandemic has had on one of the linchpins of the Greek economy: the tourism sector. Vlassis Missos, Nikolaos Rodousakis, and George Soklis document the impact of the pandemic on tourism and the significance of tourism revenues for Greece's 2021 GDP recovery. They argue that the distributional effect of the tourism sector plays a significant role in overall income inequality in Greece and develop a number of policy recommendations aiming to correct some of the problematic aspects of the country's tourism sector.
    Date: 2021–11
  5. By: Lee, Keun
    Abstract: East Asian economies had shown remarkable performance of high growth and low inequality, thereby forming a separate East Asian capitalism group within the VoC typologies. There are strong signs that these economies have recently been converging to the LME group, featuring low growth and high inequality, features shared by East Asian economies since the 2000s. Financialisation is arguably one cause for these outcomes of low growth and high inequality. This paper re-evaluates East Asian capitalism in the context of the Covid-19 pandemic, which has suddenly halted globalisation and further questioned the superiority of shareholder capitalism associated with financialisation and globalisation. It proposes rebalancing between shareholder and stakeholder capitalism. By doing so, East Asian economies can be reborn as a hybrid capitalism, with East Asian capitalism at its original core, to restore their growth momentum in an inclusive way. It is also argued that the post-pandemic retreat of globalisation is a good opportunity to restore autonomy in domestic economic policymaking over interest rates and exchange rates, while imposing some adjustments over formerly excessive capital mobility.
    Keywords: East Asian model; globalization; Covid-19; shareholder capitalism; stake-holder capitalism.
    JEL: F32 F59 O16 O19
    Date: 2020
  6. By: Elliott Ash; Sharun Mukand; Dani Rodrik
    Abstract: We distinguish between ideational and interest-based appeals to voters on the supply side of politics, and integrate the Keynes-Hayek perspective on the importance of ideas with the Stigler-Becker approach emphasizing vested interests. In our model, political entrepreneurs discover identity and worldview “memes” (narratives, cues, frames) that shift beliefs about voters’ identities or their views of how the world works. We identify a complementarity between worldview politics and identity politics and illustrate how they may reinforce each other. Furthermore, we show how adverse economic shocks may result in a greater incidence of ideational politics. We use these results to analyze data on 60,000 televised political ads in U.S. localities over the years 2000 through 2018. Our empirical work quantifies ideational politics and provides support for the key model implications, including the impact of higher inequality on both identity and worldview politics.
    JEL: D72 D78
    Date: 2021–11
  7. By: Shafik, Minouche
    Abstract: Capitalism needs a new social contract to better manage the consequences of technology and an increasingly diverse and flexible workforce. That social contract should retain the benefits of flexibility but do a better job of providing security in the form of mandatory benefits, putting a floor on incomes, and investing far more in helping workers adapt to economic shocks and rising automation. It also means a new deal with business that would achieve a more level playing field in how capital and labour are taxed.
    Keywords: capitalism; social contract; labour markets; taxation of capital; OUP deal
    JEL: P00 J08 I38 A13
    Date: 2021–12–01
  8. By: Caner Ates; Dietmar Maringer
    Abstract: The literature on macroeconomic agent-based models (MABMs) has gained growing attention since the early 2000s. Most MABMs dealing with market regulations have been focusing on the financial market. In contrast, only a small number of MABMs investigate the effects of labor market regulations. In this paper, we provide a parsimonious yet extendable agent-based model that focuses on labor market dynamics within a macroeconomic framework, suitable to analyze labor market regulations such as minimum wages and employment protection legislations. The model is stock-flow-consistent and small-scaled, i.e., there are only workers and firms interacting in the goods and in the labor market. There are two different types of workers, namely skilled and unskilled, and firms produce according to a CES production function. This allows for substitutability between the two types of workers. A one-factor-at-a-time (OFAT) sensitivity analysis is performed to gain insights into the mechanisms and patterns produced by the model. Results show that the model is sensitive to the minimum wage parameter and that for reasonable values of the minimum wage, income inequality decreases, while aggregate consumption rises. Overall, the results suggest that the model can be used to further investigate aggregate and distributional effects of labor market regulations.
    Keywords: Labor market; minimum wage; stock-flow consistent; macroeconomic agent-based model; CATS.
    Date: 2021–12–09
  9. By: Abdul A. Erumban; Gaaitzen de Vries
    Abstract: This paper proposes an empirical framework that relates poverty reduction to production growth. We use the GGDC/UNU-WIDER Economic Transformation Database to measure the contribution to growth of productivity improvements within sectors and structural change—the reallocation of workers across sectors—for 42 developing countries from 1990 to 2018. Next, the contributions are used in a regression analysis, which indicates that poverty reduction is significantly related to structural change and productivity growth in manufacturing.
    Keywords: Poverty, Production, Growth, Manufacturing, Structural change, Developing countries
    Date: 2021
  10. By: Peter Christensen; Ignacio Sarmiento-Barbieri; Christopher Timmins
    Abstract: We report evidence on discriminatory behavior from the largest correspondence study conducted to date in the rental housing market. Using more than 25,000 interactions with rental property managers across the 50 largest U.S. cities, the study reveals that African American and Hispanic/LatinX renters continue to face discriminatory constraints in the majority of U.S. cities although there are important regional differences. Stronger discriminatory constraints on renters of color (particularly African Americans) are also associated with higher levels of residential segregation and larger gaps in intergenerational income mobility. Using matched evidence on the actual rental outcomes at the properties in our experiment, we show that correspondence study measurements of discrimination do indeed predict actual outcomes.
    JEL: J15 R31
    Date: 2021–11

This nep-pke issue is ©2021 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.