of fairies and governments an abm evaluation of the expansionary austerity hypothesis abstract this paper draws on a debate between robert skidelsky and paul krugman on the expansionary austerity hypothesis as a motivation to build a demand driven agent based model the model features contagion across firms to explore whether fiscal consolidations may become expansionary due to a positive effect on investors expectations which could be the result of a dominant public discourse on the need for austerity simulations suggest that while a wave of optimism affecting a small proportion of firms may lead to short run positive output effects in the economy by raising investment demand these effects are not sufficient to neutralize the negative macroeconomic impacts of cutting government spending these findings are in keeping with the scantiness or absence of empirical evidence in favor of the expansionary fiscal contraction hypothesis

making the same mistake again or is this time different the world faces an economic crisis of unprecedented proportions but much of the policy response has certainly not lacked for precedent national governments and international organisations including the international monetary fund imf have looked to crises of the past for solutions to the present and austerity has become a familiar theme the inability to effectively resolve the current crisis however gives rise to the question is this time different this article provides a broad overview to the origins and development of the recent economic crisis and the resort to policies of austerity although there is historical precedent for the resort to austerity such as the uk treasury view during the 1920s and 1930s this time things are different many of the current problems are deeply rooted and reflect the impact of the shift towards free market economics that started in the 1970s 2 the origins of the crisis since the beginning of the 1970s the private sector finance in particular has reorganised on an increasingly global scale it has innovated in terms of both structure and products and it has experienced significant growth as tridico 2012 this issue shows this financialisation was characterised by a ballooning of stock exchanges as many firms decided not only to list their shares but also to become involved in speculative finance in response to pressures on firms to maximise shareholder value together with the progressive erosion of worker and trade union rights and influence labour markets became more flexible and real wages stagnated concurrently profits rebounded leading to burgeoning inequality in this context aggregate demand and consumption were bolstered by easy credit and the wealth effects of speculative bubbles first in stocks and shares and then in housing

the role of the media in fiscal consolidation programmes the case of ireland a number of european countries have implemented austerity programmes since the onset of the current economic crisis this paper focuses on fiscal consolidation a central aspect of such programmes using the case of ireland it investigates the significant role of the mass media in presenting such policies to the public a role which has so far remained unexamined conceiving of the irish experience over the past few decades as a case of neoliberalisation it uses a critical political economic conceptualisation of news organisations to consider 431 editorials and opinion articles discussing fiscal consolidation in three leading irish newspapers between 2008 and 2012 it finds that the majority of articles present viewpoints in favour of fiscal consolidation and display a preference for spending cuts over tax hikes which substantiates the claim that ireland has adopted neoliberal policies to address the crisis only a minority of articles oppose fiscal consolidation these mostly contest specific spending cuts but usually fail to criticise fiscal consolidation itself by calling for economic alternatives such as keynesian stimulus differences between newspapers are also discussed highlighting their ideological cleavages

capital markets and urban unemployment in this paper we investigate conditions under which reductions in distortions in one market improve national welfare despite the presence of distortions in another market the specific distortions we study are a differential between capital rentals and a rigid urban wage we also introduce a diagrammatic technique which may find use in the analysis of other problems

debt dynamics in europe a network general equilibrium gvar approach in this work we investigate the dynamic interdependencies among the eu12 economies using a competitive general equilibrium network system representation additionally using bayesian techniques we estimate the autoregressive scheme that characterizes the equilibrium price system of the network while characterizing each economy node in the universe of our network in terms of its degree of pervasiveness in this context we unveil the dominant s unit s in our model and estimate the dynamic linkages between the economies nodes lastly in terms of robustness analysis we compare the findings of the degree pervasiveness of each economy against other popular quantitative methods in the literature according to our findings the economy of germany acts as weakly dominant entity in the eu12 economy meanwhile all shocks die out in the short run without any long lasting effect

dairy tariff quota liberalization contrasting bilateral and most favored nation reform options we develop a highly disaggregated tariff line source differentiated partial equilibrium model of u s specialty cheese imports to investigate alternative reform options for tariffrate quotas a mixed complementarity framework is used to represent bilateral and multilateral tariff quota administration methods within the u s dairy industry the impact of liberalizing u s specialty cheese imports via bilateral and multilateral tariffrate quota expansions out of quota tariff cuts and simultaneous liberalization scenarios is evaluated we find that the path of liberalization is quite different depending on the reform approach undertaken the results have important policy implications in the agricultural negotiations

paradoxical positions the methodological contributions of feminist scholarship the goal of this paper is to consider the contributions of feminist activism and interdisciplinary scholarship to economic institutional methodology by further extending the historical institutional analysis of key categories such as the self ownership of labour model of locke smith and marx the paradoxical position of women can be avoided a greater understanding of the reification of concepts like property and the economy and the role of gender in naturalizing them will help to expand the narrow role of economics discourse in the articulation of feasible economic policies and objectives for human development

the impact of government debt expenditure and taxes on aggregate investment and productivity growth in this paper we evaluate empirically the impact of fiscal policy on two key determinants of long term growth i e private investment and productivity growth we mostly focus on a panel of 20 oecd economies from 1970 to 2009 although we also present some estimates based on data for 80 developing economies our findings suggest that high public debt adversely affects both aggregate investment spending and productivity growth through distortions related to the size of the public sector we also find weak evidence of some non linear effects on productivity with government debt becoming more detrimental in advanced economies when above 85 90 of gdp

the political economics of austerity the 2007 8 financial crisis has reignited the debate about economic austerity with the aim of understanding why a government would pursue such a policy in the current context of persistent economic recession this article traces the social political and economic developments that have together shaped the evolution of ideas about austerity from the earliest theorizing by the classical political economists some three hundred years ago throughout the historical narrative important analytical themes revolve around the arguments used to justify austerity notably appeals to ethics and morality reinforced by misleading analogies drawn between government budgets and the accounts of firms and households these include concerns about inflation and the observed relationship between inflation and unemployment ricardian equivalence and non keynesian effects of austerity and the correlation between public debt levels and economic growth the class analytics of austerity who bears the burden of austerity and who benefits and the process by which alternative ideas penetrate the mainstream and reconstitute the conventional wisdom are also important analytical themes

index investment and financialization of commodities the authors found that concurrent with the rapidly growing index investment in commodity markets since the early 2000s prices of non energy commodity futures in the united states have become incr

living and dying with hard pegs the rise and fall of argentina s currency board the rise and fall of argentina s currency board shows the extent to which the advantages of hard pegs have been overstated the currency board did provide nominal stability and boosted financial intermediation at the cost of endogenous financial dollarization but did not foster monetary or fiscal discipline the failure to adequately address the currency growth debt trap into which argentina fell at the end of the 1990s precipitated a run on the currency and the banks followed by the abandonment of the currency board and a sovereign debt default the crisis can be best interpreted as a bad outcome of a high stakes strategy to overcome a weak currency problem to increase the credibility of the hard peg the government raised its exit costs which deepened the crisis once exit could no longer be avoided but some alternative exit strategies would have been less destructive than the one adopted

how to restore equitable and sustainable economic growth in the united states abstract today s weakness in the us economy results from lack of aggregate demand due to high and growing inequality underinvestment in public infrastructure and technology that is complementary to private capital continuing mild austerity difficulties encountered in making the structural transformation from manufacturing to a service based economy and a financial sector failing to provide adequate funds to smes an agenda to restore growth includes a carbon price inducing climate investments increased public investments in infrastructure and technology fighting inequality through redistribution and rewriting the rules structuring the economy and reforming the financial sector and the global reserve system

public debt overhangs advanced economy episodes since 1800 exceeds 90 percent of nominal gdp on a sustained basis such public debt overhang episodes are associated with lower growth than during other periods even more episodes are associated with lower growth than during other periods even more striking among the 26 episodes we identify 20 lasted more than a decade the long striking among the 26 episodes we identify 20 lasted more than a decade the long duration belies the view that the correlation is caused mainly by debt buildups during duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions the long duration also implies that the cumulative shortfall business cycle recessions the long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive these growth reducing effects of in output from debt overhang is potentially massive these growth reducing effects of high public debt are apparently not transmitted exclusively through high real interest high public debt are apparently not transmitted exclusively through high real interest rates in that in eleven of the episodes interest rates are not materially higher rates in that in eleven of the episodes interest rates are not materially higher

the optimality of tariff quotas under uncertainty abstract a tariff quota is a schedule of tariffs in which the tariff rate steps upward as imports exceed some critical quantity or value this has desirable properties in the face of uncertainty about domestic demand and supply and about foreign supply we show that a specific ad valorem tariff quota is the policy maximizing domestic expected surplus subject to constraints on average imports import expenditure and on the average amount by which imports import expenditure exceed some critical value

sine praejudicio economics and the 2014 scottish independence referendum the purpose of this paper is to analyse the contribution of expert economic opinion to the 2014 referendum campaigns on scottish independence we argue that the input from economics to both sides of the debate as well as to independent analysis was constrained by a mainstream economics framing the result was a focus on calculable outcomes predicated on unchanging institutions and behaviour and the question of currency arrangements that assumes the status quo is an optimal currency area as the consequences of constitutional change for institutions and behaviour are uncertain an equilibrium framework treats anything beyond calculable prediction as a shock inducing fear of the unknown in contrast a political economy approach is tailored to analysing uncertain developments and encompassing the broader issues relating to values democracy and power and is thus better suited to the analysis of constitutional change

centralisation employment and wage dispersion this paper is about bargaining institutions and their influence on wage dispersion and employment using novel statistical measures it compares labor market performance in seventeen oecd countries since 1973 it concludes that countries with highly centralized wage bargaining have generally achieved the best performance combining high employment with low wage dispersion thereby avoiding certain major inequalities prevalent elsewhere the paper also presents a formal model of bargaining based on the work of l calmfors and j driffill 1988 simulations are used to illustrate how this model generates the kind of outcomes described in the empirical part of the paper copyright 1992 by royal economic society

does sovereign debt weaken economic growth a panel var analysis we estimate panel vector autoregressions to analyze the highly disputed relationship between sovereign debt and economic growth using data on 20 developed countries we find no evidence for a robust effect of debt on growth even for higher levels of debt we do find a significant negative reverse effect of growth on debt which explains the negative correlation

the economics of new labour policy and performance this paper reviews the foundations of new labour s economic policies and the performance of the economy since 1997 it argues that new labour s policies have evolved from thatcherism and that it has largely embraced the tenets of neo liberalism new labour has rejected most aspects of keynesianism and its policies have eschewed the use of active demand management policies but it has been the high levels of demand in particular consumption expenditure that have driven economic growth in the uk and which have ensured that as yet new labour has not faced the problems of dealing with a major economic downturn

globalization and its challenges rudi was born and grew up in krefeld germany he was an undergraduate at the university of geneva and completed his ph d at the university of chicago in 1971 which is where we met he was a student of robert mundell and both the subject matter the development of the mundell fleming model and the elegance and insights of his early work reflected mundell s influence he taught at the university of rochester and at the university of chicago before accepting an offer from mit in 1975

locational choice for free trade zones a comment abstract in this comment we derive conditions under which there are no equilibria for the models investigated by miyagiwa 1993

inflation and employment is there a third way high post war inflation precipitated a counter reformation in theory from keynesianism and established the conventional wisdom that a level of unemployment existed at which prices stabilised the policy application of this notion failed to improve economic performance and although inflation fell mass unemployment and poverty returned the explanation for this from within the new orthodoxy was that demand and supply conditions in the labour market had changed and unemployability explained joblessness a study of the trend in import prices suggests however that the fall in inflation can be more readily explained by falls in import prices and other changes which redistributed resources from the periphery to the core this suggests that monetary control works indirectly on inflation by lowering economic activity and by reducing the bargaining power of the relatively weak the enormous economic and social costs of this suggest that institutional ways of controlling prices offer major benefits copyright 2000 by oxford university press

keynes and the confidence faeries budgetary constraints were never the primary object of policy for john maynard keynes they were constraints not objectives however keynes identified the psychological channels through which budgetary discipline and other policy conventions might influence investment he even accepted that in rare circumstances the psychological factors might overwhelm direct policy interventions unfortunately the polarisation of the current debate means traditional keynesians are unlikely to search out this aspect of his work and the confidence faeries are unlikely to read any of keynes s work this article draws attention to this aspect of his work

taxes and the quality of capital abstract this paper shows that tax policy toward investment by changing the relative prices of capital varieties even within narrow classes of equipment can have a direct effect on the quality composition of capital goods that firms purchase detailed data on farming mining and construction machinery suggest that this impact is economically important firms significantly shift investment toward higher quality varieties when they receive investment subsidies and do not do so when investment is high for other reasons in the aggregate all of the new investment generated by tax subsidies appears to come from firms shifting to higher quality capital goods rather than buying a larger number of their existing capital types the paper also applies a methodology for calculating the implied deadweight loss from the quality distortion and shows that its magnitude may represent a substantial efficiency cost from capital taxation that is neglected in conventional work

optimal allocation of quotas abstract consider a government which fixed the supply of a good e g by an import quota suppose the market for the good can be partitioned e g sales in different years or in different areas of the country can be considered sales in different markets we show that maximization of consumer surplus in the domestic economy may require segmentation of the domestic market into two but no more parts

the political economy of socially irrational products in the past long waves have dissipated themselves in an exhaustion of innovations under spending and or a shortage of labour and ensuing upswings depended upon adjustments in the wage profit relation and a restructuring of the patterns of production and consumption whereas monetarist keynesian and marxist perspectives all focus attention on changes in the distributional or former dimension of the present crisis in this paper i argue that the critical distinguishing feature is grounded more in the latter the intractable character of post world war ii production and consumption the intractability refers to the resilience of the contemporary structure of production and consumption whereas in the past competitive market forces facilitated the restructuring of production and consumption required at the end of a long boom today the economy remains encumbered with a range of investments and product forms entrenched within the social and political order but which are increasingly costly in real terms proposals to resolve these dislocations by government cutbacks and the imposition of selective austerity fail to capture the organisational sources of rising costs and government paralysis even if such programmes were to stimulate a renewed spurt of economic growth they would quickly be accompanied by rising cost pressures and a political backlash for the austerity would be imposed on a populace imprisoned within an expensive infrastructure of consumption and therefore required to maintain a high level of expenditure the task of this paper is to explain the intractable character of the current crisis in terms of the contemporary organisation of consumption and production the argument proceeds in the following order first the politicised market generating irrational patterns of production and consumption in key industries has driven up the cost of living second these patterns of production and consumption once they were embedded in political and social institutions have become highly resistant to the competitive forces which in theory reduce inflationary pressures third the burdens and constraints imposed on the state by the prevailing patterns of production and consumption combine with the relative ineffectiveness of keynesian and monetarist measures to set up the state as a scapegoat for economic irrationalities lodged more deeply in the contemporary structure of production and consumption

foreign investment in the presence of an informal sector in the context of a segmented economy in which the urban unemployed subsist in informalsector activities earl grinols has recently questioned conventional wisdom whereby foreign investment with repatriated earnings is necessarily immiserizing for the host country in this paper we extend grinols s analysis and place it in a broader context permitting richer conceptions of informal sector activities our principal finding is that the original insight is surprisingly robust once heckscher ohlin samuelson factor intensities are suitably modified and interpreted our models may also have independent interest for other work on the informal sector

austerity and gender inequalities in europe in times of crisis the post 2008 recession and the countercyclical responses by european governments that followed triggered an extensive wave of fiscal adjustments although underpinned by widespread consensus the implementation of such measures has also been severely criticised while their effect on output and employment has been extensively investigated their impact on wage inequality has received less attention in this paper we focus on the consequences of fiscal consolidation measures for gender inequality after describing the literature based conceptual framework of our analysis we provide empirical evidence of the effect of fiscal consolidation on i the adjusted gender wage gap and ii the patterns of gender horizontal segregation the analysis covers eu 28 countries in the years 2010 13 results show that austerity measures both tax based and expenditure based impacted significantly on various aspects of gender wage inequality putting at risk the relatively little progress achieved in europe so far

the asymmetric effects of reversible tariff changes under the united states gsp in a partial equilibrium textbook model of competitive international trade the volume and net value of imports always vary inversely with the tariff rate this result depends on assumptions that the tariff changes are substantial exogenous permanent and applied on a most favorednation mfn basis empirical applications of this theory however encounter different conditions generalequilibrium effects such as changes in prices exchange rates and income tend to be offsetting imperfect competition can make the incidence of the tariff indeterminate many tariff changes are small endogenous temporary and or discriminatory to illustrate how these differences in tariffs can alter their observed relation to imports we offer the following examples a tokyo round cuts in u s tariffs were staged generally over eight years and averaged only 0 3 percent per annum 6 as compared to 6 4 percent average annual changes in american import prices over the same 1980 87 period 18 if search and recontracting costs caused buyers to ignore relatively small price variations then many observed tariff changes would produce negligible effects b governments tend to lower tariffs when imports are low enough to obviate political problems and they raise them as a response to import surges observers who ignore this endogeneity might conclude that imports are positively related to tariff rates c while many tariff concessions are bound under the gatt some duties are temporarily altered to provide import relief for domestic producers or preferential access for certain trade partners importers may not respond if the temporary benefits of doing so are exceeded by the costs of finding substitutes d the importers response to a tariff change will also differ between cases where some or all imports of a given product are affected a discriminatory tariff change might shift the shares of suppliers while leaving total imports virtually unaltered empirical studies seldom test the relation between imports and tariffs directly time series estimates of import demand equations usually subsume the tariff in a gross price variable

what s the big idea the third generation of policies for economic growth economists and reform minded policymakers in latin america are asking themselves and are being asked hard questions these days the broad consensus is that two decades of reform have had too little toshow for it sporadic and sputtering economic growth and stagnant real wages especially for the unskilled is not what was expected this paper puts the latin american experience in the global context and examines the processes that brought the region to this point we look at the trends in policy advice on economic growth and how they were formed and we address the question of what economists can do now to help the region move in restoring economic growth

an empirical model of mark ups in a quality differentiated export market abstract this paper develops an empirical model to allow for imperfect competition in the market for traded goods a simultaneous equation model incorporating the demand for and supply of taiwanese footwear exports to the united states is specified and estimated the model allows the identification of two separate sources of mark ups in export prices the first comes from the u s imposed quantitative restriction on these exports the second comes from imperfect competition in the international market for these exports the results suggest competitive behavior by taiwanese footwear exporters the quantitative restriction resulted in a 16 9 percent mark up of prices over marginal cost

immiserizing growth for a quota distorted small economy under variable returns to scale the authors demonstrate that growth of a small open economy distorted by import quotas in contrast to the case of tariffs improves welfare when the industries display identical variable or constant returns to scale furthermore growth cannot reduce welfare if the industry that experiences technical progress exhibits a greater returns to scale than the static industry conversely if the dynamic sector displays a smaller returns to scale than the static sector growth of a quota distorted small economy can be immiserizing the authors results are independent of whether hicks neutral technical progress occurs in the importable or the exportable sector

the meaning of failed replications a review and proposal the welcome rise of replication tests in economics has not been accompanied by a consensus standard for determining what constitutes a replication a discrepant replication in current usage of the term can signal anything from an unremarkable disagreement over methods to scientific incompetence or misconduct this paper proposes a standard for classifying one study as a replication of some other study it is a standard that places the burden of proof on a study to demonstrate that it should have obtained identical results to the original a conservative standard that is already used implicitly by many researchers it contrasts this standard with decades of unsuccessful attempts to harmonize terminology and argues that many prominent results described as replication tests should not be described as such adopting a conservative standard like this one can improve incentives for researchers encouraging more and better replication tests

product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies this paper examines the treatment of exports and imports and external closure rules adopted in recent single country computable general equilibrium models of small economies the paper presents a simple one sector analytic model which captures the major features of the multi sector counterpart used in applied models the paper derives graphical and algebraic solutions to the model and shows that unlike some earlier external closures this one gives rise to a well behaved price taking economy the model is also useful to illustrate the role of elasticities in popular trade theoretic models that include traded and non traded goods

neo liberalism and new labour policy economic performance historical comparisons and future prospects the paper analyses19760 70s inflation the replacement of keynesian with neo liberal economic policy and the post 1979 decline in inflation it is shown that the fall in inflation is explained by trends in import prices rather than by switches in economic policy however new labour s conversion to neo liberalism means that no alternative to it is on political offer despite returns to pre keynesian policy making the success of which will depend on price policies based on an understanding of the institutional roots of inflation

production quota in multiproduct pacific fisheries abstract assessing the individual firm s technology and costs in a multispecies fishery allows design of a more effective output quota prior to regulation by anticipating and controlling for the firm s regulation induced responses an empirical study of a pacific coast trawl fishery indicates that the firm s flexibility of product decision is tightly constrained by its technology and cost structure hence as the resource stock for the regulated species sablefish deteriorates and the trip quota progressively tightens the firm cannot sufficiently reorganize its product bundle to preclude increasingly large sablefish disposal this defeats the purpose of the production quota

capital markets urban unemployment and land abstract this paper shows that the remarkable result by khan and naqvi that a reduction in the capital rental differential always improves welfare despite the presence of a rigid urban wage can be obtained only for the 2 2 harris todaro model in an extended harris todaro framework incorporating a third specific factor a decrease in a distortion may not necessarily be welfare improving

how effective are trade barriers an empirical analysis of trade reduction diversion and compression we analyze the effects of trade barriers using highly disaggregated data the level of disaggregation allows us to separate the effects of tariffs and nontariff barriers ntbs into reduction dive

differentiated products and supply controls in the analysis of agricultural policy reform the case of tobacco abstract with a multi market model of the u s tobacco and cigarette industries we analyze the impact of a reduction in the assistance to u s tobacco producers by relaxing production quotas with nonbinding price support and by lowering tariffs on tobacco imports the results show the importance of incorporating differentiated product and supply control assumptions into agricultural policy analysis

piero sraffa and the true object of economics the role of the unpublished manuscripts this special issue is concerned with the work of piero sraffa and with recent developments in its interpretation occasioned by the opening of the sraffa archives in late 1993 1 it brings together some of the contributions to a workshop on this theme that was sponsored by the cambridge journal of economics and held in july 2010 on the occasion of the 50th anniversary of the publication of piero sraffa s major work production of commodities by means of commodities pcmc the original workshop on new perspectives on the work of piero sraffa was aimed at sraffa scholars who had taken the opportunity to engage with materials in the sraffa archives and who were interested in exploring their potential for revisiting and placing pcmc in the wider context of ongoing debates on economic philosophy economic theory and economic policy as is usually the case not all presentations made at the workshop were advanced for consideration in this special issue nor could all invitees attend heinz kurz as chief editor of the sraffa archives agreed to present his view on the relevance of the sraffa archives to research on sraffa and to comment on contributions at the workshop as well as on their final versions submitted for publication in this special issue kurz s contribution to this special issue was thus written in the short time available between the receipt of final versions and publication deadlines we are indebted to him for his cooperation in the preparation of this special issue we are especially grateful for his patience in the time taken to bring this project to publication this abstract was borrowed from another version of this item

the relative inefficiency of quotas the cheese case the nonequivalence of tariffs and quotas under a wide variety of circumstances is well established in economic theory this study considers heterogeneity as a source of nonequivalence and demonstrates its practical importance where restriction is inevitable the bias of economists in favor of price instruments is not thoroughly grounded this study should help provide a foundation the point of departure from the equivalence model is differentiation of products

debt and growth is there a constant tipping point abstract this paper highlights the crucial role of a time varying threshold effect of public debt on economic growth our contribution is twofold first we extend the constant threshold regression kink model of hansen 2017 by allowing for a time varying state dependent threshold second we apply our model to investigate the effect of debt on growth using data from the u s over the period of 1791 2009 our empirical results clearly support a nonlinear debt threshold effect and the threshold is time varying and state dependent

restricting the market for quota an analysis of tobacco production rights with corroboration from congressional testimony regulatory programs that restrict output levels often impose restrictions on the transfer of rights to produce or to use particular inputs in this paper we use a unique cross section time series data set from north carolina to quantify the welfare effects of transfer restrictions for poundage quota under the u s flue cured tobacco program we find that the deadweight costs of such restrictions are small but that the distributional effects are substantial we analyze congressional testimony on quota transfer legislation and conclude that our estimates of the distributional effects are consistent with expressed views of market participants

the effects of trade liberalisation abstract the liberalisation of agricultural trade has been an important component of the uruguay round of multilateral trade negotiations under the gatt a considerable amount of research effort has been expended on estimating the costs of agricultural protectionism most of this activity has been based on a partial equilibrium framework with conventional quantification of the distributive benefits and costs to be expected from liberalisation attempts at general equilibrium analysis have been fewer but provide evidence of the economy wide gains from the removal of protection whilst these analyses have had a powerful influence on the nature of the political discussions on agricultural trade policy they have not helped define the details of politically acceptable alternatives to current agricultural supports the reasons are the technical economic data and statistical problems which restrict the interpretation of results to broad generalisations and the failure of analyses to focus on the most important political concerns indicating these concerns may help define the focus of future research but it is doubted if conventional economic analysis has very much more to offer

nonlinear causality between crude oil price and exchange rate a comparative study of china and india a failed replication negative type 1 and type 2 evidence published in this journal by bal and rath 2015 purports a bidirectional nonlinear causality between oil price and india s exchange rate and for china unidirectional nonlinear causality running from exchange rate to oil price their entire testing protocol and ensuing results rest upon claims that all the variables contain a unit root we raise several critical issues and revisit the order of integration of the series as well as their cointegration and granger causality properties through a pure replication and a reanalysis contrary to bal and rath 2015 when we repeat their estimated model with their specification of the ng and perron 2001 unit root test on their data we find that their oil price series rol is level stationary negative replication type 1 a result which makes all their subsequent results biased and misleading our reanalysis confirms that rol is i 0 linearly as well as nonlinearly we also find that the basic bivariate model proposed by bal and rath 2015 fails to produce statistically robust and stable cointegrating patterns nonlinear causality tests confirm the absence of any nonlinear causality for both countries negative replication type 2

price discrimination and markups in export markets abstract imperfect competition in international markets is one of the key explanations for why prices of similar goods might differ among destination countries this paper develops an empirical model to examine the presence of price discrimination stemming from imperfect competition in the international market for a country s exports the model is used to examine the export behavior of taiwanese exporters of footwear the generalized supply relation allows identification of deviations from competitive pricing in each export market in addition the model provides insights into the extent of exchange rate pass through finally the model is modified in order to estimate the effect of the voluntary export restraint imposed in the u s on footwear imports from taiwan

does high public debt consistently stifle economic growth a critique of reinhart and rogoff we replicate reinhart and rogoff 2010a and 2010b and find that selective exclusion of available data coding errors and inappropriate weighting of summary statistics lead to serious miscalculations that inaccurately represent the relationship between public debt and gdp growth among 20 advanced economies over 1946 2009 countries with public debt gdp ratios above 90 averaged 2 2 real annual gdp growth not 0 1 as published the published results for i median gdp growth rates for the 1946 2009 period and ii mean and median gdp growth figures over 1790 2009 are all distorted by similar methodological errors although the magnitudes of the distortions are somewhat smaller than with the mean figures for 1946 2009 contrary to reinhart and rogoff s broader contentions both mean and median gdp growth when public debt levels exceed 90 of gdp are not dramatically different from when the public debt gdp ratios are lower the relationship between public debt and gdp growth varies significantly by period and country our overall evidence refutes rr s claim that public debt gdp ratios above 90 consistently reduce a country s gdp growth

the 90 public debt threshold the rise and fall of a stylised fact we put the original reinhart rogoff data set made public by herndon et al 2013 to a formal econometric test to identify public debt thresholds endogenously we show that the nonlinear relation between debt and growth is not robust taken with a pinch of salt our results suggest however that a negative association between central government debt and growth may set in at debt levels as low as 20 of gdp further and greater thresholds may exist but their magnitude is uncertain for general government debt the threshold is considerably higher at about 50 country specific estimates reveal a large amount of cross country heterogeneity for some countries including the united states a nonlinear negative link can be detected at about 30 of gdp for others no nonlinearities can be established our results are a formal econometric confirmation that the 90 public debt threshold is not in the reinhart rogoff data but our results also seem to suggest that public debt be associated with poor economi

social opportunity costs and immiserizing growth some observations on the long run versus the short social opportunity costs of labor and capital are of importance to planners and loan officers alike and negative social opportunity costs have been studied by theorists in the guise of immiserizing growth see for example bhagwati srinivasan and wan 1978 in this note we present a unified treatment of such costs in the context of distortions of the harris todaro variety to which increasing emphasis is being given in both trade and development theory we pay particular attention to the distinction between the long run and the short i e to situations when capital is intersectorally mobile and when it is not our results clash with our intuition developed on the basis of both a the differential wage setting of which the mobile capital version of our model is an obvious generalization b the harristodaro model with an exogenously given rigid wage in the urban sector and immobile capital for example we show that immiserizing growth is impossible with intersectorally mobile capital but possible when capital is nonshiftable section ii presents the model and section iii investigates the question of the effect of population growth and capital accumulation on the size of the unemployment pool the results of section iii of interest in themselves are then used to discuss social opportunity costs and the possibility of immiserizing growth section v ends the paper with two concluding remarks

trade democracy and the gravity equation abstract does democracy affect trade there are several channels by which democracy may affect trade with differing implications first democratization in the exporting country can improve product quality and reduce trade costs increasing bilateral trade second democratization in the importing country may increase trade barriers and thus reduce imports in this paper i analyze the effect of democracy on trade by augmenting the gravity equation with democracy using a rich panel data set and controlling for the endogeneity of democracy i find empirical evidence consistent with the hypothesis that democracy fosters trade this finding is robust to various econometric methods and to the use of disaggregated specifications

wages economic development and the customary standard of life this paper examines empirically the evolution of the customary standard of life and how this relates to real wages and economic development its starting point is sraffa s reintroduction of the classical notion of wages as the cost of reproducing labour so that they are necessarily a charge on production however when considering a production system generating a surplus sraffa offered no explanation of how the surplus might be realised and distributed rather he concentrated on the choice of technique as the profit share varied from 0 to 1 his approach was one of taking a snapshot of a productive system at a point in time in contrast this paper explores the trend in wages in the uk over the past 150 years and the evolving level and composition of what became the social necessities of worker consumption i e the customary standard of life in this process four dynamically interacting processes can be identified i a progressive increase in the productive potential of the system ii the diffusion of a greater quantity and varieties of consumer goods the growth of property ownership by consumers and their use of credit in a cumulative improvement in their customary standard of life iii the consolidation of the customary standard of life into real wages by collective bargaining and iv diffusion of improved living standards by an extension of collective bargaining coverage to include groups previously excluded and the growth of the welfare state in which the failure to achieve the customary standard of life defines poverty and triggers policy designed to alleviate it the central role played by the customary standard of life in driving real wages means that the inputs of labour power into commodity production can be represented by the commodity composition of the customary standard of life in sraffa style analyses in this the successive cross sections in the historical flow of economic development showing the commodity flows into and out of production will be ever changing like the still frames in a moving picture show moreover such a historical approach rules out the possibility that at any time changes in the rate of profit will precipitate the switching of methods of production past choices of techniques are historically embedded in the capital stock the composition of which is modified by new investment and the scrapping of old as it wears out becomes technically outmoded and or demand for its products declines nevertheless changes in the distribution of income have consequences for the future path of economic and social development and what this might be is arguably the most useful area for economic and social research copyright oxford university press

contradictions of austerity the global economic and financial crisis has been marked by the following paradox a much more severe depression than the global slump of 2008 09 was prevented by determined state intervention in the form of bank bailouts and fiscal stimuli yet this bout of apparently successful keynesianism has been followed by a turn to fiscal austerity justified in terms reminiscent of the treasury view against which keynes relentlessly polemicised in the 1930s this article explores the sources of this policy shift among the factors considered are the ideology of neoliberalism the economic and political power of the banks and the relative weight of finance in individual economies the broader context of financialisation is also considered the conclusion is reached that an oscillation between bouts of austerity and laxer policies encouraging the development of asset bubbles may be built into neoliberalism as an economic policy regime the implication is that alternatives to austerity must embrace broad institutional transformation copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the contemporary relevance of a cambridge tradition economics as political economy political economy as social theory and ethical theory in this review essay i set out key aspects of nuno martins the cambridge revival of political economy in so doing i also provide some comments on the current state of economics since these provide some context for an appreciation of what martins is trying to achieve martins is focused on making the positive case for classical political economy cpe as a form of theory that is quite different from the modern mainstream for martins that difference is based on its approach to the distribution of a surplus expressed through a social ontology that is based on historical open systems and in which the key aspect of open systems is the institutional and hence deliberative activity by which the surplus is decided which is ultimately an issue for ethics it is through a cambridge tradition focusing on sraffa keynes lawson and sen that cpe a classical social theory and ethical deliberation are brought together bringing them together is an act of synthesis and i conclude by providing a constructive critique of the terms of this synthesis

piero sraffa and the future of economics how did piero sraffa look at the future of economic theory first when he arrived in england in the mid 1920s and then after the publication of his extraordinarily compact little book production of commodities by means of commodities 1960 the author sifts through sraffa s published works and abundant unpublished papers his acquaintances and personal contacts and vicissitudes the conclusions he arrives at remain problematical but do not refrain him from clearly expressing his specific quite definite views copyright oxford university press

growth and public debt what are the relevant trade offs the interplay between growth and public debt is addressed considering a barro type 1 endogenous growth model where public spending is financed through taxes on income and public debt debt is assumed to be a fixed proportion of gdp which is used as a policy parameter by the government we first show that when debt is a large enough proportion of gdp two distinct bgps may co exist one being indeterminate therefore local and global indeterminacy may arise and self fulfilling expectations appear as a crucial ingredient to understand the impact of debt on growth and on macroeconomic fluctuations we then exhibit two types of important trade off associated with self fulfilling expectations first we show that the lowest bgp is always decreasing with respect to the ratio of debt gdp while the highest one is increasing as a result depending on the bgp selected by agents expectations the relationship between debt and growth is not always negative second we show that the highest bgp which provides the highest welfare is always locally indeterminate while the lowest is always locally determinate therefore depending on the expectations of agents when debt is increasing large fluctuations associated to self fulfilling believes may occur and be associated at the same time with welfare losses if there is a coordination on the low steady state finally a simple calibration exercise allows to provide an understanding of the recent experiences of many oecd countries

output spillovers from changes in sovereign credit ratings this research examines how a sovereign rating revision of one country influences the economic growth rates of other countries rating revisions have significant output spillover effects a one notch upgrade downgrade prompts on average a significant downward revision of about 0 03 0 07 in the consensus forecast of annual economic growth rates of other countries in the two month period after the event the spillovers are transmitted through direct and indirect trade and financial linkages between event and non event countries the evidence indicates that a predominance of differential common spillovers leads upgrades downgrades to produce adverse output effects for other countries

does the central american common marke1 benefit its members does the central american common market benefit its members i introduction the members of the central american common market cacm have recently taken measures to revitalize their union they have formally pledged to improve regional economic integration and they have reinforced the common external tariff they took these measures in the belief that a stronger union would improve their economic welfare a belief that has also led both the united states and the european community to support a stronger union the idea that a regional trading group would improve economic welfare of the central american countries originated in the early 1950s when raul prebisch and other economists in the united nations economic commission for latin america ecla argued persuasively that such a union would help these countries develop their economies to many the views of the ecla economists were vindicated when the inceptionof the cacm in 1960 was followed shortly by accelerated economic growth in the region further support for their views came from quantitative studies cline and delgado 1978 willmore 1976 yotopoulos and nugent 1976 nugent 1974 and wilford 1970 which all concluded that the union provides static welfare gains for its members there is however room for skepticism about the benefits of the cacm much of the argument of the ecla economists is based on the notion that import substitution is a good way to promote economic development a notion that has since fallen into disrepute nor does the accelerated growth that followed the union s formation provide strong evidence that the cacm provides benefits the volume of trade between members is too small for the union to have had more than a minor effect on the region s economy so even if this effect were negative the region would presumably still have grown rapidly in the mid 1960s the evidence from the quantitative studies is also faulty these studies did not estimate directly the effects of the cacm but merely imputed these effects by assuming either that market shares or income elasticities would have remained constant without the union furthermore they assumed that supplies of different countries are perfect substitutes for each other whereas recent studies by collier 1979 grossman 1982 and anderson 1985 have shown that the degree of substitutability in demand between these supplies is important in determining how customs unions and other discriminatory tariff changes affect welfare it is particularly important to allow for less than perfect substitutability when analyzing the cacm because member imports from developed countries often have no close substitutes among locally produced goods in this paper the static welfare consequences of the cacm are reexamined with two important advances over the previous studies first direct estimates are made of the effects of the union second the shortcomings of the perfect substitutes assumption are overcome by allowing imports from different countries to be imperfect substitutes for each other and for domestic output the model which is partial equilibrium in nature also enjoys two advantages over the computable general equilibrium models such as those whalley 1985 and hamilton and whalley 1985 used to examine the effects of various economic integration schemes it requires fewer data and its operation is more transparent so it shows more clearly how introducing imperfect substitutes alters the traditional analysis of a customs union the model s main limitation is that it applies only to customs unions among small countries ii the model geometric presentation figures 1 2 and 3 show the home market and figure 4 the export market for country a a representative member of the cacm a s residents distinguish between four goods imports from other members imports from nonmembers domestic output for home consumption and exports

economic history and economic theory the staples approach to economic development the ideas and institutions within which the current global crisis is being addressed reflect the power structures of the past and are under pressure to evolve but main stream economics tenaciously retains its long standing power over academe and policy while denying a theoretical role for power here we consider the contribution of economic history to theorising in particular we present a case study in the form of an economic history approach which emphasises the role of the state in relation to markets the staples approach of harold innis we apply this approach to the modern financial sector

on the harris todaro model with intersectoral capital mobility n b professor neary was based at trinity college dublin when this article was first published the full text of the article is not available in ora at this time citation neary j p 1981 on the harris todaro model with intersectoral capital mobility economica 48 191 219 234

reference point dependence and specification bias abstract issues of specification bias arise in deterministic as well as in econometric models this paper shows that such biases depend on the reference point used to evaluate them using numerical general equilibrium models in which the incorporation of quality upgrading in the competitive case increases or reduces the welfare costs of trade barriers depending upon whether a trade distorted equilibrium or free trade is used as the reference point

portugal s bailout and the crisis of the european union from a capability perspective the global financial crisis revealed the weaknesses of the eu integration process in general and of the eurozone in particular the eu institutions responded to the crisis in an inadequate way in the belief that government debt stabilisation had to be pursued before the economy recovers this strategy was based on economic forecasting errors exposing member states to the speculative behaviour of financial markets leading to the bailout of countries such as portugal and undermining the confidence in the single currency in the european economy and in the european project itself we analyse here the crisis of the european union eu in light of the bailout of portugal and propose an alternative strategy for portugal and the eu drawing upon amartya sen s capability approach

quotas as options quota licenses are options their price is given by expected discounted future value which hangs on the possibility that the quota may bind a number of auxiliary administrative details of quota systems are also analyzed in this context the presence of use it or lose it requirements and of restrictions on rate of usage of the annual quota can be seen as attempts to offset the implied protection on below limit imports they are shown to be inefficient recognition of the option valuation of quota licenses is rich with suggestions for future work on evaluation of quotas and comparisons with alternative schemes for protection

financial stress sovereign debt and economic activity in industrialized countries evidence from dynamic threshold regressions we analyze how the impact of a change in the sovereign debt to gdp ratio on economic growth depends on the level of debt the stress level on the financial market and the membership in a monetary union a dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non linear manner due to amplifications from the financial sector employing dynamic country specific and dynamic panel threshold regression methods we study the non linear relation between the growth rate and the debt to gdp ratio using quarterly data for sixteen industrialized countries for the period 1981q1 2013q2 we find that the debt to gdp ratio has impaired economic growth primarily during times of high financial stress and only for countries of the european monetary union and not for the stand alone countries in our sample a high debt to gdp ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm

revisiting the bi directional causality between debt and growth evidence from linear and nonlinear tests abstract we revisit the bi directional causality between public debt and the rate of gdp growth for 10 emu countries alongside the us uk and japan over sample periods spanning from 1970 up to 2014 whilst accounting for the nonlinear properties of both the individual time series and their relation in both directions our results indicate that the causal relation between debt and growth in either direction is weak at best for most of the countries in our sample we find no robust evidence of a long run causal effect using bi variate granger causality tests bi directional causality is detected only for austria while for france luxembourg and portugal causality runs solely from debt to growth but the estimated effects are very small in finland spain and italy granger causality from growth to debt in the former two and debt to growth in italy appears to be present in the short run our findings cannot be taken as evidence that a high level of public indebtedness is not risky for the economy or as invalidating hypotheses postulating effects in either direction in the relation between debt and growth

the simultaneous evolution of growth and inequality research on inequality and growth can be divided into two strands one deriving from kuznets and lewis has tried to identify a mechanistic relationship between growth or level of income and inequality the other has tried to find causal explanations of growth and inequality treating each independently in this paper we draw from both strands to test whether growth and inequality are the joint outcomes of other variables and processes we find that simultaneous examination of growth and inequality yields significantly different results and has different consequences for policy from previous independent studies the empirical literature on growth and inequality can be divided into two broad strands one following the pioneering work of kuznets and lewis is motivated by the pessimistic conjecture that the process of growth and development somehow requires increasing inequality at least in the early stages this has led to many efforts to identify a mechanical relationship between the level of development and inequality anand and kanbur 1993 or to determine whether faster growth requires higher or lower inequality the second strand has sought to identify the causal factors influencing the evolution of growth and inequality independently this research has looked either at growth for example barro and sala i martin 1995 or at inequality li et al 1997 but has not tried to identify those factors that might simultaneously influence both growth and inequality 2 thus the literature that looks simultaneously at growth and inequality descending most notably from kuznets 1955 relates them in a mechanistic manner that ignores or minimises the role of other causal factors including policy while the literature that incorporates other causal factors including policies looks independently at growth and inequality neither approach is particularly convincing from a theoretical standpoint the evolution of growth and inequality must surely be the outcome of similar processes in addition neither approach is particularly useful for the policy maker who needs to balance the impact of policies on both growth and distribution in this paper we investigate whether growth and inequality are simultaneously determined and if so whether or not they are subject to

estimating the distortionary effects of ethnic quotas in singapore using housing transactions abstract desegregation is a key policy issue in many countries i investigate a residential desegregation program in singapore the ethnic housing quotas i show that choice restrictions imposed on apartment blocks above the quota limits constrained could have distortionary effects causing price and quantity differences for constrained versus unconstrained blocks i test these predictions by hand matching more than 500 000 names in the phonebook to ethnicities to calculate ethnic proportions at the apartment block level i can then investigate differences for constrained and unconstrained blocks close to the quota limits and test for sorting around the limits i find that price differences are between 3 and 5 quantity effects are economically significant translating to longer time on market durations selection cannot fully explain these results my results point to challenges in achieving desegregation using quantity restrictions

altruism in the family and selfishness in the market place adam smith argued in a famous passage that people are selfish in their market transactions it is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but from their regard to their own interest we address ourselves not to their humanity but to their self love and never talk to them of our own necessities but of their advantages 1937 p 14 in an earlier study he said with irony we are not ready to suspect any person of being defective in selfishness 1853 p 446 selfishness in market transactions has been assumed in practically all subsequent discussions of the economic system objections were dismissed with vague allusions to human nature or with an assertion that altruism loses out to selfishness in the struggle to survive in the market sector yet altruism is generally recognized to be important within a family again adam smith said

inequality among world citizens 1820 1992 this paper investigates the distribution of well being among world citizens during the last two centuries the estimates show that inequality of world distribution of income worsened from the beginning of the 19th century to world war ii and after that seems to have stabilized or to have grown more slowly in the early 19th century most inequality was due to differences within countries later it was due to differences between countries inequality in longevity also increased during the 19th century but then was reversed in the second half of the 20th century perhaps mitigating the failure of income inequality to improve in the last decades jel d31 f0 n0 o0

economic issues in tariffication an overview abstract the agricultural trade liberalization proposal known as tariffication aims at converting all existing non tariff barriers ntbs to trade into bound tariffs and to reduce these tariffs over time this is in tune with the original philosophy of the general agreement on tariffs and trade gatt and it calls for a dramatic overhaul of existing agricultural policies in many developed countries the main economic issues that arise with tariffication stem from the non equivalence of tariffs and ntbs in a number of scenarios this paper analyzes non equivalence arising from the existence of imperfect competition in importing countries price instability in importing and exporting countries and inefficient allocation of quantitative restrictions it is shown that in all these cases the definition of an appropriate equivalent tariff to be used in tariffication is not straightforward and that in general this equivalent tariff cannot be computed on the basis of only observed price differences between countries tariff rate quotas which are meant to be the main tool of implementation of tariffication according to the existing proposal are analyzed in some detail concerning the relationship between tariffication and the other elements of the trade liberalization package it is shown that tariffication would limit the scope of export subsidy policies it is also shown that the existence of production and export subsidies makes observed price gaps between countries of questionable value in setting equivalent tariff levels finally it is argued that the main focus of tariffication should be the conversion of ntbs to acceptable long run bound tariffs rates and considerable flexibility in this conversion process could be exercised in the transition period