nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2023‒01‒09
nine papers chosen by
Karl Petrick
Western New England University

  1. Varieties of demand and growth regimes: Post-Keynesian foundations By Hein, Eckhard
  2. Demand and growth regimes of the BRICs countries By Campana, Juan Manuel; Emboava Vaz, João; Hein, Eckhard; Jungmann, Benjamin
  3. Secular Stagnation: A Classical-Marxian View By Manuel David Cruz; Daniele Tavani
  4. House price cycles, housing systems, and growth models By Kohler, Karsten; Tippet, Ben; Stockhammer, Engelbert
  5. Nothing new under the sun: The so-called "growth model perspective" By Amable, Bruno
  6. FDI-led growth models: Sraffian supermultiplier models of export platforms and tax havens By Woodgate, Ryan
  7. Is Keynes's involuntary unemployment only cyclical? By Nicolas Piluso; E. Le Héron; Edouard Cottin-Euziol
  8. The macroeconomic implications of financialisation on the wealth distribution By Meijers, Huub; Muysken, Joan
  9. Taxing Multinational Enterprises: A Theory-Based Approach to Reform By Wolfram F. Richter

  1. By: Hein, Eckhard
    Abstract: We review post-Keynesian contributions to demand and growth regime analysis. First, we distinguish the Kalecki-Steindl approach and the Sraffian supermultiplier approach as relevant theoretical foundations for demand and growth regime research, with investment-driven and distribution-led growth in the focus of the former and autonomous demand-led growth in the latter. Based on this, we review different ways of analysing the co-existence of demand and growth regimes in the current period of neoliberal and finance-dominated capitalism. We distinguish, first, a basic national income and financial accounting decomposition approach, second, a Sraffian supermultiplier inspired growth decomposition approach, and, third, several lenses looking at growth drivers. We argue that these three levels of analysis are, in principle, not mutually exclusive nor even contradictory, but that they rather complement each other. We conclude that, in particular the PK analysis of growth drivers provides several systematic links with comparative and international political economy approaches, when it comes to the introduction of the political economy dimension (social blocs, growth coalitions, changes in institutions favouring certain type of re-distribution and economic policies, etc.), while the national income and financial accounting, as well as the Sraffian supermultiplier growth accounting decomposition approaches provide the consistent macroeconomic foundations for such syntheses.
    Keywords: Demand and growth regimes,post-Keynesian economics,Kalecki-Steindl models,Sraffian supermultiplier models,wage-/profit-led regimes,finance-led/finance-burdened regimes,debt-led private demand boom regimes,export-led regimes,domestic demand-led regimes
    JEL: B59 E02 E11 E12 E65 P51
    Date: 2022
  2. By: Campana, Juan Manuel; Emboava Vaz, João; Hein, Eckhard; Jungmann, Benjamin
    Abstract: We contribute to the recent debate in post-Keynesian economics (PKE), comparative political economy (CPE) and international political economy (IPE) on growth regimes. The paper presents an analysis of changes in demand-led growth regimes in the BRICs countries, Brazil, Russia, India, and China, after the Global Financial Crisis and the Great Recession 2007-09. It discusses and applies two approaches, a first one based on national income and financial accounting decomposition and a second one, based on the Sraffian Supermultiplier (SSM) growth model, distinguishing the dynamics of autonomous expenditure growth from those of the induced components of aggregate demand. It is argued that the SSM approach provides the bridge between the traditional approach based on national income and financial accounting decomposition and the analysis of growth drivers, both in PKE as well as in CPE and IPE. This is illustrated by pointing out some changes in the underlying political economy and economic policy growth drivers in each of the countries.
    Keywords: Demand and growth regimes,growth decomposition,autonomous demand-led growth
    JEL: E02 E11 E12 P16 P51
    Date: 2022
  3. By: Manuel David Cruz; Daniele Tavani
    Abstract: We study a model of secular stagnation, income and wealth distribution, and employment in the classical-Marxian (CM) tradition, with the purpose of drawing a contrast with established neoclassical accounts of the topic (Piketty, 2014; Gordon, 2015). In these explanations, which assume full employment of labor at all times, an exogenous reduction in the growth rate g increases the difference with the endogenous rate of return to capital r. The capital-income ratio rises and, if the elasticity of substitution is above one, the wage share falls. Our explanation does not presuppose full employment, and features a crucial tension between profit-driven capital accumulation and wage-driven labor-augmenting technical change: both these features are defining for CM economics and have been emphasized in recent heterodox macro literature. Institutional or technological shocks that lower the wage share initially foster capital accumulation —which is profit-driven— and increase wealth inequality. However, the effect on long-run growth is negative, because a reduction in the wage share lessens the incentives by firms to introduce labor-saving innovation, which is wage-driven. The capital-income ratio must rise in order to restore balanced growth and stabilize employment in the long run; and the increase in wealth inequality is permanent. The ultimate effect on long-run employment depends on the relative strength of the response of technical change vs. real wage growth to labor market institutions: we identify a simple condition that delivers either a wage-led or a profitled long-run employment regime. We then test the model using time-series data for the US (1960-2019): impulse responses from VECM estimators lend support to the main predictions of our model, and point to the employment-population ratio being wage-led.
    Keywords: Secular Stagnation, Factor Shares, Wealth Inequality, Employment
    JEL: D31 D33 E11 E24 E25
    Date: 2022–12
  4. By: Kohler, Karsten; Tippet, Ben; Stockhammer, Engelbert
    Abstract: The paper provides a framework for theorising the role of house price cycles in national growth models. We synthesise Minskyan approaches with comparative political economy (CPE) by arguing that institutions influence the extent to which countries experience what we call 'house price-driven growth models'. First, we argue that house price dynamics have been undertheorized in existing growth models analysis. Finance-led models can be properly understood only against the background of rising house prices that stimulate consumption through wealth effects and investment through construction. Second, we identify behavioural and Minskyan theories of housing cycles as suitable frameworks to theorise the impact of housing on growth. However, this literature does not provide an analysis of cross-country differences in housing cycles. Third, drawing on the CPE literature on housing systems, we argue that institutions such as homeownership rates and mortgage-credit encouraging institutions can explain differences in the intensity of housing cycles. We provide preliminary empirical support for this framework from a cross-country analysis. Our results show strong cross-country heterogeneity in the intensity of housing cycles. Countries with more intense house price cycles also tend to exhibit more volatile business and debt cycles. Homeownership rates and mortgage-credit encouraging institutions are positively correlated with the volatility of house price cycles.
    Keywords: Post-Keynesian Economics,Comparative Political Economy,growth models,housing,house price cycles
    JEL: E32 O57 R21 R31 B52
    Date: 2022
  5. By: Amable, Bruno
    Abstract: Recent contributions in comparative political economy have made much of the 'growth model perspective', presenting it as a way to 'rethink political economy'. This paper argues that the origins of the growth model approach can be found in contributions by Michel Freyssenet made in the framework of GERPISA (Groupe d'étude et de recherche permanent sur l'industrie et les salariés de l'automobile) in the 1990s/2000. By presenting the contributions and limitations of Freyssenet's approach, it is possible to establish how contemporary growth model approaches fail to establish a solid link between political economy and heterodox macroeconomics. It appears that an approach that starts from the differentiation of interests of social groups and takes into account the autonomy of politics has more potential to achieve this task, allowing to recover the inspiration of Kalecki's 1943 article on the political limits to economic policy.
    Keywords: French Theory of Régulation,growth models,accumulation regimes,political economy
    JEL: B52 P10
    Date: 2022
  6. By: Woodgate, Ryan
    Abstract: This paper develops two Sraffian supermultiplier models of two different kinds of economies that are dependent upon foreign direct investment (FDI): the "export platform FDI-led" growth model and the "tax haven FDI-led" growth model. The former is driven by the growth of the exports of foreign-owned firms and is associated with greenfield FDI inflows, whereas the latter is driven by the growth of profits booked at foreign-owned shell companies that are partly absorbed through taxation and is associated with intangible FDI inflows. The two models achieve demand, output, and income growth via fundamentally different channels yet appear similarly export-led given how profit shifting artificially inflates the net exports of tax havens. Based on these models, a set of empirical indicators are proposed to differentiate exportplatform from tax haven economies. In contrast to Bohle/Regan (2021), who characterise output growth in both Hungary and Ireland as being led by the exports of foreign-owned firms, the model and indicators proposed here support the hypothesis that Ireland is closer to the tax haven FDI-led growth model.
    Keywords: Foreign direct investment,growth model,multinational corporation,tax haven
    JEL: E12 P44 F21 F23 F62
    Date: 2022
  7. By: Nicolas Piluso (CERTOP - Centre d'Etude et de Recherche Travail Organisation Pouvoir - UT2J - Université Toulouse - Jean Jaurès - UT3 - Université Toulouse III - Paul Sabatier - Université Fédérale Toulouse Midi-Pyrénées - CNRS - Centre National de la Recherche Scientifique); E. Le Héron (CED - Centre Émile Durkheim - IEP Bordeaux - Sciences Po Bordeaux - Institut d'études politiques de Bordeaux - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Edouard Cottin-Euziol (LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles)
    Abstract: In this article, we set out to demonstrate that the idea commonly found in macroeconomics textbooks that Keynesian unemployment is simply cyclical, is fallacious. After highlighting the shortcomings of traditional interpretations that confine Keynesian unemployment to a short-run perspective, we show that several types of macroeconomic models exhibit involuntary unemployment equilibria over the long run. In particular, it will be shown that there are many cases where full employment may not be achieved despite price and wage flexibility.
    Abstract: Dans cet article, nous cherchons à démontrer que l'idée communément admise dans les manuels de macroéconomie selon laquelle le chômage keynésien est simplement conjoncturel, est fallacieuse. Après avoir mis en évidence les lacunes des interprétations traditionnelles qui confinent le chômage keynésien à une perspective de court terme, nous montrons que plusieurs types de modèles macroéconomiques présentent des équilibres de chômage involontaire sur le long terme. En particulier, nous montrerons qu'il existe un grand nombre de cas où le plein-emploi peut ne pas être atteint malgré la flexibilité des prix et des salaires.
    Keywords: involuntary unemployment,wage flexibility,growth,SFC models,chômage involontaire,flexibilité des salaires,croissance,modèles SFC
    Date: 2022–11–29
  8. By: Meijers, Huub (RS: GSBE MORSE, RS: GSBE other - not theme-related research, Macro, International & Labour Economics, RS: UNU-MERIT Theme 1); Muysken, Joan (RS: GSBE other - not theme-related research, Macro, International & Labour Economics, RS: GSBE - MACIMIDE)
    Abstract: Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene by stimulating ‘unconventional’ monetary policies. In earlier papers, we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. These developments create social tensions and therefore can have severe economic consequences. In the present paper, we bring all our earlier models together in one stock-flow consistent model, which we estimate and simulate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. In line with our previous research we argue that these phenomena can be captured very well by a stock flow consistent model in the tradition of Godley and Lavoie, which we estimate and simulate for the Netherlands. From simulations with our model we show that both housing price bubbles and asset price bubbles occur due to low interest rates and riskier bank behaviour, induced by a central bank policy of Quantitative Easing. The intended aim of this central bank policy – enhancing economic growth – is not reached, because the monetary stimulus is absorbed by the financial sector. Moreover, a presumably unintended consequence of Quantitative Easing in the Netherlands is an increase in wealth inequality.
    JEL: E44 B50 E60 G21 G32 F40
    Date: 2022–10–26
  9. By: Wolfram F. Richter
    Abstract: Almost 140 countries have agreed to reallocate the rights to tax international corporate profits and to introduce minimum tax rates. The agreed plan is the product of pragmatism and a search for consensus, but ambitious. It includes steps towards unitary taxation to be established by a multilateral convention that the world has not yet seen in comparable format. This paper argues for a reform that retains separate entity accounting and addresses the flaws in the current system of corporate taxation at their root rather than merely fixing symptoms. To this end, a reform aimed specifically at the rules governing the taxation of intangible assets is recommended.
    Keywords: OECD/G20 BEPS Project, formula apportionment, separate entity accounting, Shapley assignment of taxing rights, residual profit allocation/splitting
    JEL: H25 F23 M48
    Date: 2022

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