nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2022‒02‒07
eight papers chosen by
Karl Petrick
Western New England University

  1. Structuralist Development Macroeconomics and New Developmentalism: Theoretical Foundations and Recent Developments By Jose Luis Oreiro; Kalinka Martins da Silva
  2. "Structural Change, Productive Development, and Capital Flows: Does Financial 'Bonanza' Cause Premature Deindustrialization?" By Alberto Botta; Giuliano Toshiro Yajima; Gabriel Porcile
  3. Climate Growth Theory By Julia M. Puaschunder
  4. A Modigliani-Miller Theorem for the Public Finances of Globalized Economies: Theory, Policy Implications, and Keynesian Reflections By Biagio Bossone
  5. The emergence of debt and secular stagnation in an unequal society: a stockflow consistent agent-based approach By Claudius Graebner-Radkowitsch; Anna Hornykewycz; Bernhard Schuetz
  6. Environmental, Social and Corporate Governance (ESG) Diplomacy: The Time Has Come for a Corporate and Financial Social Justice Great Reset By Julia M. Puaschunder
  7. Healthcare Dependent Multiplier By Julia M. Puaschunder
  8. How Do Pandemics End? Two Decades of Recurrent Outbreak Risk Following the Main Waves By Max Schroeder; Spyridon Lazarakis; Rebecca Mancy; Konstantinos Angelopoulos

  1. By: Jose Luis Oreiro; Kalinka Martins da Silva
    Abstract: The Brazilian New Developmentalist School, also known as "consensus of São Paulo", can be understood as an approach to the deep determinants of economic development in which macroeconomic policy regime has a key role in explaining the long-term growth differentials among countries, notably middle-income countries. The school was originated from the seminal works of Bresser-Pereira (2006, 2007 and 2009) who defined new developmentalism as a set of proposals for institutional reforms and economic policies, whereby the middle-income countries seek to achieve the per-capita income level of developed countries. The first aim of this article is to present the theoretical foundations and the recent developments of the New Developmentalism School. Regarding the theoretical foundations, New Developmentalism is based on the so-called Structuralist Development Macroeconomics, which can be understood as a synthesis between Classical Development Theory, Latin American Structuralism and Post-Keynesian demand-led growth models. One of the most known and controversial features of new developmentalism is the key role of the manufacturing industry and real exchange rate in the process of economic development. The present article presents the state-of-the art reasoning of the New-Developmentalist school about why and how real exchange rate and manufacturing industry matters for long-run growth. Finally, the article discusses the convergences and divergences between New-Developmentalism and Balance of Payments Constrained Growth models, which are up today the major heterodox explanation for uneven development.
    Keywords: New-Developmentalism, Structuralist Development Macroeconomics, Real Exchange Rate
    JEL: O11 O14 O40
    Date: 2022–01
  2. By: Alberto Botta; Giuliano Toshiro Yajima; Gabriel Porcile
    Abstract: The outbreak of COVID-19 brought back to the forefront the crucial importance of structural change and productive development for economic resilience to economic shocks. Several recent contributions have already stressed the perverse relationship that may exist between productive backwardness and the intensity of the COVID-19 socioeconomic crisis. In this paper, we analyze the factors that may have hindered productive development for over four decades before the pandemic. We investigate the role of (non-FDI) net capital inflows as a potential source of premature deindustrialization. We consider a sample of 36 developed and developing countries from 1980 to 2017, with major emphasis on the case of emerging and developing economies (EDE) in the context of increasing financial integration. We show that periods of abundant capital inflows may have caused the significant contraction of manufacturing share to employment and GDP, as well as the decrease of the economic complexity index. We also show that phenomena of "perverse" structural change are significantly more relevant in EDE countries than advanced ones. Based on such evidence, we conclude with some policy suggestions highlighting capital controls and external macroprudential measures taming international capital mobility as useful tools for promoting long-run productive development on top of strengthening (short-term) financial and macroeconomic stability.
    Keywords: COVID-19; Structural Change; Capital Inflows; Macroprudential Policies
    JEL: O14 O30 F32 F38
    Date: 2022–01
  3. By: Julia M. Puaschunder (The New School, Department of Economics, Eugene Lang College, New York, NY 10003, USA)
    Abstract: The climate change crisis has gained unprecedented urgency in the most recent decade. Overall, climate change has already led to and will continuously lead to environmental tipping points and irreversible lock-ins that will decrease the overall productivity and common welfare. When taking a closer look at the macroeconomic growth prospects as measured in Gross Domestic Product (GDP) per country, a changing climate will affect countries differently, when considering different mean temperatures but also differences in the GDP sector composition per country and a differing peak temperature at which a GDP sector can be most productive. In the first economic ‘classic’ theories of Adam Smith, Thomas Robert Malthus, David Ricardo, Karl Marx and Joseph Schumpeter land productivity was considered as an underlying growth driver. In the evolution of Modern Growth Theory (MGT), these theories and insights got abandoned. With climate change pressuring economic productivity and the rising impact of global warming expected to determine economic output more and more so in the future, this paper calls for a reintegration of climate and temperature into standard growth theory. In light of the enormous effect of temperature and climate on economic productivity that is likely to rise in the years to come but also with reference to the highly unequally distributed economic winning and losing prospects in-between countries and over time, this article argues for an integration of temperature and climate in contemporary Growth Theory, called Climate Growth Theory. Micro- and macroeconomic attempts to integrate productivity differences between countries based on energy supply, climate and overall favorable working conditions will be presented alongside most recent models to integrate temperature and climate into macroeconomic growth models and sustainable consumption patterns.
    Keywords: Climate Change, Economics of the Environment, Endogenous Growth Theory, Energy, Environmental Governance, Environmental Justice, Exogenous Growth Theory, Green New Deal, Intergenerational Equity, Monetary Policy, Multiplier, Non-renewable energy, Renewable energy, Sustainability
    Date: 2021–08
  4. By: Biagio Bossone
    Abstract: This article is about the economics of the power of global finance to enforce its own interests over national economies. In line with the capital structure irrelevance principle of Modigliani and Miller (1958) as applied to corporate finance, the article shows that the value of the public sector claims (money and debt) of a financially globalized economy is independent of the capital structure of the government’s finances. In particular, the article transposes the Modigliani-Miller approach (enhanced as needed) to public finances and proves a new "neutrality theorem" (and two important related corollaries) whereby, in an economy that is internationally highly financially integrated, the cost of the capital needed by governments to finance their deficits is independent of whether: i) financing originates from debt or money, ii) debt is denominated in domestic or foreign currency, and iii) money and debt are issued under floating or fixed exchange rates. The two corollaries show that governments seeking to monetize their deficits must remunerate money holdings with a return that vary inversely with credibility is lower and directly with the stock of money (eventually defying the original policy objective). The article discusses the options available for countries to approach financial globalization.
    Keywords: capital structure; credibility; debt, equity, and money; global financial investors; credibility; policy space; public sector claims
    Date: 2022–01
  5. By: Claudius Graebner-Radkowitsch (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; ZOE Institute for future-fit Economies, Bonn, Germany; International lnstitute of Management and Economic Education, Europa-Universitaet Flennsburg, Germany); Anna Hornykewycz (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Bernhard Schuetz (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: We use an agent-based stock-flow consistent model of a closed economy without technological change that considers different classes of households, status consumption and a Minskyan banking sector to analyze the relationship between rising saving rates, the accumulation and distribution of private financial wealth and the evolution of public debt. Conducting a series of experiments, we find evidence for Keynes’ famous claim that a rise in the propensity to save will not necessarily be matched by a rise in the propensity to invest, culminating in either chronic government deficits or consistently high unemployment rates if the government refuses to accept those deficits. The result emerges endogenously from the interaction of fully decentralized agents. The model indicates that promoting consumer credit can at best provide a very short-lived relief to this problem.
    Keywords: propensity to save; wealth accumulation; public debt; unequal distribution of income and wealth; consumer credit; household bankruptcy; agent-based stock-flow consistent modeling
    Date: 2022–01
  6. By: Julia M. Puaschunder (The New School, Department of Economics, Eugene Lang College, New York, NY 10003, USA)
    Abstract: The external shock of the novel Coronavirus SARS-CoV-2 has profound impacts around the world for this generation and the following. Although accounting for the most drastic societal shift in modern history, the Coronavirus pandemic also holds the potential of a Great Reset. This paper addresses three trends that have become prevalent in the wake of the Coronavirus pandemic: (1) A rising inequality experienced has led to demands for Corporate Social Justice, namely the corporate engagement in social justice initiatives and action. (2) The finance world has had opportunities to diversify and exchange COVID-struck industries for COVID-profiting market segments and therefore a rising financial market performance versus real economy budget constraint gap has arisen. (3) Governments around the world are pegging economic COVID-19 rescue and recovery aid to pursue noble goals – such as climate change abatement and a transitioning to renewable energy in the United States Green New Deal and the European Green Deal and the European Sustainable Finance Taxonomy. These trends point at the integration of environmental, social and corporate governance in the corporate sector. The aftermath of the crisis is now a time for a great system reset to integrate environmental, social and corporate governance in the corporate and finance sectors. Future economic policy research may be inspired by legal expertise on disparate impact. With respect for current trends of citizen scientists and science diplomacy, public policy work may embrace environmental, social and corporate governance whole-roundedly. While natural behavioral laws were guiding anchors to address inequality during a turbulent time of the pandemic, more rational behavioral insights could nudge people into more equitable growth strategies in a recovering world.
    Keywords: Change management, Corporate Social Justice, Coronavirus, Corporate sector, COVID-19, Disparate impact, Environmental, European Green Deal, Social and Corporate Governance (ESG), Equitable Growth, Equality, Equity, Finance, Great reset, Green New Deal, Law and economics, Pandemic, Public policy, Recovery
    Date: 2021–08
  7. By: Julia M. Puaschunder (The New School, Department of Economics, USA)
    Abstract: The currently ongoing COVID-19 crisis has challenged healthcare around the world. The call for global solutions in international healthcare pandemic outbreak monitoring and crisis risk management has reached unprecedented momentum. The novel coronavirus SARS-CoV-2 imposes the most unexpected external economic shock to modern humankind, triggering abrupt consumption and behavior pattern shifts around the world with widespread socio-economic impacts. In order to alleviate unexpected negative fallouts from the crisis, governments around the world have incepted the largest ever amount of strategic economic bailout rescue and recovery packages that particularly focus on economic and social targets. The potential focus of bailouts and recovery ranges from urban-local and national to even global and future-oriented beneficiaries, as pursued in public investments on climate stabilization in the United States Green New Deal or the European Green Deal Sustainable Finance Taxonomy. Large-scale and future-oriented governmental investments are valuable macroeconomic multipliers that can benefit society as a whole in the short run and long term. Economic multipliers trickle down positively in society since governmental spending incepting projects leads to increased salaries, opportunities to support a family and employ other people in the consumption of goods and services, to name a few economic multiplying growth opportunities in the wake of governmental spending. This paper proposes the idea that multiplier effects may vary based on the causes that receive governmental funding. Evidence of country differences in multiplier effectiveness already exist. Multipliers also appear to trickle down in society with a certain time lag. Lastly, multiplier effects can also be negative if the government chooses to cut spending during austerity measures. The discussion proposes potential future hypothesis testing opportunities for investigating healthcare dependent multipliers. Given the enormous amount of governmental COVID rescue and recovery aid in the aftermath of the COVID-19 crisis and the blatant importance of health in the eye of the pandemic, the time has come to investigate if there is a certain effect of governmental spending on healthcare that influences the multiplier. In order to understand a potential multiplier effect of governmental spending on healthcare, a healthcare dependent multiplier effect could test if healthcare related governmental spending leads to a higher or lower than 1.6 multiplying factor. If a relation between multiplier effects and healthcare exists, a future step would be to investigate if it also holds or varies for particular governmental investment in prevention and preventive healthcare. If there are effects for governmental spending on healthcare, well-being and social welfare are potential moderators of the effect. In the 21st century, healthcare is directly related to digitalization and technological advancement, which could be other moderators to control for. Lastly, corruption has been found to be negatively related to quality healthcare and may also be accounted for in future healthcare related multiplier investigations. The paper ends with an outlook on policy implications of the prospective envisioned research.
    Keywords: Austerity, Coronavirus, Corruption, COVID-19, Digitalization, Economic contraction, Economic growth, European Green Deal, Finance, Green New Deal, Government spending, Health, Healthcare, Multiplier, Negative multiplier, Pandemic, Positive multiplier, Prevention, Preventive care, Public policy, Recovery, Rescue and recovery aid, Social welfare, Trickle down effect, Well-being
    Date: 2021–08
  8. By: Max Schroeder; Spyridon Lazarakis; Rebecca Mancy; Konstantinos Angelopoulos
    Abstract: The risk of recurrent outbreaks following the main waves of a pandemic has been acknowledged. We provide evidence of the scale and duration of this outbreak risk. We compile municipal public health records and use national data to model the stochastic process of mortality rates after the main pandemic waves of two historical pandemics across multiple locations. For the 1890-91 influenza pandemic in England and Wales, as well as the 1918-19 influenza pandemic in the US and eight major UK cities, we find elevated mortality risk that persists for nearly two decades. The generality of the findings suggests that, without modern means of intervention, post-pandemic outbreak risk is likely to persist for an extended period, as we demonstrate in an application to COVID-19.
    Keywords: pandemics, outbreak risk, influenza, Covid-19, archive data
    Date: 2021

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