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

wage stagnation rising inequality and the financial crisis of 2008 the most widely embraced explanations of the financial crisis of 2008 have centered upon inadequate regulation stemming from laissez faire ideology combined with low interest rates although these widely acknowledged causal factors are true beneath them lie deeper determining forces that have received less notice wage stagnation and a dramatic increase in inequality in the u s over the preceding 35 years wage stagnation and heightened inequality generated three dynamics that made the economy vulnerable to systemic dysfunction the first is that they constrained consumption reducing profitable investment potential in the real economy and thereby encouraging an every wealthier elite to flood financial markets with credit helping keep interest rates low encouraging the creation of new credit instruments and greater indebtedness and fueling speculation the second dynamic is that consumption externalities were generated forcing individuals to struggle harder to find ways to maintain the welfare of their families and maintain their relative social status the consequence was that over the preceding three decades household saving rates plummeted households took on ever greater debt and worked longer hours the third dynamic is that as the rich took larger shares of income and wealth they gained more command over ideology and hence politics reducing the size of government cutting taxes on the rich and reducing welfare for the poor deregulating the economy and failing to regulate newly evolving credit instruments flowed out of this ideology

rising inequality as a cause of the present crisis the article argues that the economic imbalances that caused the present crisis should be thought of as the outcome of the interaction of the effects of financial deregulation with the macroeconomic effects of rising inequality in this sense rising inequality should be regarded as a root cause of the present crisis i identify four channels by which it has contributed to the crisis first rising inequality creates a downwards pressure on aggregate demand since poorer income groups have high marginal propensities to consume second international financial deregulation has allowed countries to run larger current account deficits and for longer time periods thus in reaction to potentially stagnant demand two growth models have emerged a debt led model and an export led model third in the debt led growth models higher inequality has led to higher household debt as working class families have tried to keep up with social consumption norms despite stagnating or falling real wages fourth rising inequality has increased the propensity to speculate as richer households tend to hold riskier financial assets than other groups the rise of hedge funds and of subprime derivatives in particular has been linked to rise of the super rich

the effects of rent asymmetries in posted offer markets abstract we report the results of six posted offer market experiments designed to analyze the effects of asymmetric supply and demand configurations on the price convergence path to competitive equilibrium the posted offer experiments are compared with twelve double auction experiments reported by smith and williams 1982 results differ markedly across trading institutions unlike trading under double auction rules we cannot reject the proposition that contract price convergence paths are unaffected by the distribution of consumer and producer surplus posted offer contract prices tend to converge to the competitive equilibrium from above regardless of the distribution of the exchange surplus

the economic psychology of stock market bubbles in china the chinese stock markets were extremely volatile during the period 2005 08 the shanghai stock exchange sse composite index increased more than sixfold from 1 012 in 2005 to 6 124 by the end of 2007 it then declined continuously to reach a low of 1 929 on 17 september 2008 or a drop of 70 per cent from its peak in less than 10 months although the market downturn may have been affected by the financial crisis in the united states and the rest of the world the extreme fluctuations of stock prices signify a big market bubble and the burst of that bubble must be explained by intrinsic characteristics or the economic psychology of chinese investors based on a detailed market data analysis this paper attributes the development of the stock market bubble to three key psychological factors greed envy and speculation and the burst of the bubble to three contrasting factors fear lack of confidence and disappointment it concludes that only after chinese companies become really commercialised and profitable and investors become rational can the stock markets become stable without extreme volatility as seen in the past government policies can play a role in soothing market volatility detrimental to shareholders and the wider economy but investors should not depend on government for making their own investment decisions journal compilation 2009 blackwell publishing ltd

anticipated policy and endogenous growth in a small open monetary economy abstract this paper analyzes the effects of a preannounced change in the growth rate of credit in a small open economy the model based on an endogenous growth model introduces the adjustment costs for investment and the role of money in the production function and highlights the dynamic behavior of an open economy we show that an increase in the rate of anticipated credit growth lowers the steady growth rate of capital real money balances and real output we also find that the rate of depreciation of the domestic currency will rise steadily toward its stationary level the anticipated domestic credit growth hence exhibits monetary nonsuperneutrality in both the rate and the level of output in the intermediate and the long run

financial intermediation capital composition and income stagnation the case of europe abstract we look into the role of financial intermediation in inducing the european financial crisis of 2008 by exploring the effects of overall lending and the allocation of credit to specific categories of borrowers namely households vs firms we find that for the eu26 during the period 1995 2008 excessive household leverage through mortgage lending exerted a crowding out effect on availability of credit to support innovation and productive investment the crowding out effect ultimately translated into a gdp growth that was decoupled from real household income in this article we explain that shifting credit towards mortgages and away from corporate projects is consistent with rational behaviour based on historical trends aimed at minimizing short term risk for each individual bank nevertheless as a whole the sum of individual risk reducing attitudes generated a long term systemic risk

housing development and urbanisation in china rapid urbanisation and rising income have led to a strong demand for housing in urban china however housing development has been distorted by speculation income inequality and lack of government support for low cost houses in recent years house prices become so high making the vast majority of urban residents unable to afford whereas rich families are able to buy many and leave them vacant income inequality is a major cause for rising house prices which in turn exaggerates income inequality further this vicious relationship has caused social tension between the rich and the poor and unhappiness among the middle and low income groups this paper discusses the factors responsible for the housing bubble in china and recommends appropriate policies to resolve this problem

rethinking inequality decomposition with evidence from rural china we examine inequality decompositions by income source and describe a general regression based approach for decomposing inequality the approach provides an efficient and flexible way to quantify the roles of variables like education and age in a multivariate context we illustrate the method using survey data from china the empirical results demonstrate how sharply different conclusions can emerge for different decomposition rules we explain how these differences reflect the treatment of equally distributed sources of income and we discuss implications for how results from inequality decomposition are interpreted a renewed interest in economic growth political economy and the distribution of income has again placed the economics of income inequality firmly on the academic research agenda relatively poor performances in latin america have been contrasted with success stories in east asia and recent evidence on the changing income distributions of emerging economic giants like china has

two decades of income inequality in britain the role of wages household earnings and redistribution we study earnings and income inequality in britain over the past two decades including the period of relatively inclusive growth from 1997 to 2004 and the great recession we focus on the middle 90 where trends have contrasted strongly with the new inequality at the very top household earnings inequality has risen driven by male earnings although a catch up of female earnings did hold down individual earnings inequality and reduce within household inequality nevertheless net household income inequality fell due to deliberate increases in redistribution the tax and transfer system s insurance role during the great recession falling household worklessness and rising pensioner incomes

has consumption inequality mirrored income inequality we revisit to what extent the increase in income inequality since 1980 was mirrored by consumption inequality we do so by constructing an alternative measure of consumption expenditure using a demand system to correct for systematic measurement error in the consumer expenditure survey our estimation exploits the relative expenditure of high and low income households on luxuries versus necessities this double differencing corrects for measurement error that can vary over time by good and income we find consumption inequality tracked income inequality much more closely than estimated by direct responses on expenditures jel d31 d63 e21

china s uneven progress against poverty while the incidence of extreme poverty in china fell dramatically over 1980 2001 progress was uneven over time and across provinces rural areas accounted for the bulk of the gains to the poor though migration to urban areas helped the pattern of growth mattered rural economic growth was far more important to national poverty reduction than urban economic growth agriculture played a far more important role than the secondary or tertiary sources of gross domestic product gdp rising inequality within the rural sector greatly slowed poverty reduction provinces starting with relatively high inequality saw slower progress against poverty due both to lower growth and a lower growth elasticity of poverty reduction taxation of farmers and inflation hurt the poor external trade had little short term impact

interlinkages between credit debt and the labour market evidence from turkey this article examines workers use of credit in the context of a developing country turkey based on empirical material collected through questionnaires and interviews with workers in the metal sector the results provide evidence of a link between workers debt and the type of wage employment in two ways first i demonstrate that insecurity of employment and income is important in determining the increased tendency to borrow and increasing the vulnerability of workers to debt service problems second i reveal that debt adds new dimensions to capital labour relations by functioning as a disciplining mechanism

viewpoint further results on measuring the well being of the poor using income and consumption we evaluate the relative merits of income and consumption based measures of well being our results provide evidence that consumption better captures well being for those with few resources the bottom deciles of expenditures exceed those of income suggesting under reporting of income the under reporting rate for government transfers is high and rising overall non response is more severe in u s income data than in expenditure data furthermore a consumption data set requires fewer observations than an income data set to obtain the same level of precision for typical estimates finally very low consumption is more strongly related to other bad outcomes than very low income on evalue les merites relatifs des mesures de bien etre fondees sur le revenu et la consommation les resultats montrent que la consommation mesure mieux le bien etre de ceux qui ont peu de ressources les deciles au bas de la distribution des depenses depassent les deciles de la distribution des revenus ce qui suggere qu il y aurait des revenus non rapportes le taux de sous declaration des transferts gouvernementaux est eleve et croissant le taux global de non reponses est plus important aux etats unis pour les revenus que pour les depenses de plus les bases de donnees sur la consommation requierent moins d observations que celles sur le revenu pour obtenir le meme degre de precision des evaluations typiques finalement une tres basse consommation est plus fortement co reliee a d autres mauvaises conditions qu un tres bas niveau de revenu

inequality leverage and crises theory and evidence revisited rajan points to rising income inequality as a root cause of the recent financial crisis through high household leverage the rajan hypothesis has ignited debate over the relationship between inequality leverage and crises kumhof ranciere and winant prove the validity of this hypothesis with a theoretical formulation but empirical studies provide mixed evidence using different samples and estimators to clarify this controversy we re examine the issue by using the same data as in the literature and provide additional evidence after taking into account the role of asset bubbles and policy interventions our regression is based on a new tractable theoretical model that is supported by key stylised facts and all our analyses confirm the existence of the inequality leverage crisis nexus

identifying the disadvantaged official poverty consumption poverty and the new supplemental poverty measure few economic indicators are more closely watched or more important for ew economic indicators are more closely watched or more important for policy than the offi cial poverty rate it is used to gauge the extent of deprivapolicy than the offi cial poverty rate it is used to gauge the extent of deprivation in the united states and to determine how economic well being has tion in the united states and to determine how economic well being has changed over time the poverty rate is often cited by policymakers researchers changed over time the poverty rate is often cited by policymakers researchers and advocates who are evaluating social programs that account for more than half and advocates who are evaluating social programs that account for more than half a trillion dollars in government spending eligibility for some means tested transfer a trillion dollars in government spending eligibility for some means tested transfer programs is determined based on the poverty thresholds and local poverty rates programs is determined based on the poverty thresholds and local poverty rates affect the allocation of billions of dollars in federal funds affect the allocation of billions of dollars in federal funds the methods for calculating the current poverty measure largely unchanged the methods for calculating the current poverty measure largely unchanged since the 1960s have been criticized by many researchers in response the census since the 1960s have been criticized by many researchers in response the census bureau has led a two decade process of research and discussion of poverty measurebureau has led a two decade process of research and discussion of poverty measurement with an eye to revising the offi cial measure the process has involved hundreds ment with an eye to revising the offi cial measure the process has involved hundreds of papers dozens of offi cial census bureau publications u s census 2010 of papers dozens of offi cial census bureau publications u s census 2010 and two national academy of sciences reports citro and michael 1995 iceland and two national academy of sciences reports citro and michael 1995 iceland 2005 we will not summarize this vast literature here rather we will examine 2005 we will not summarize this vast literature here rather we will examine the properties of three measures of poverty the offi cial u s poverty rate the new the properties of three measures of poverty the offi cial u s poverty rate the new supplemental poverty measure fi rst released by the u s census bureau in fall 2011 supplemental poverty measure fi rst released by the u s census bureau in fall 2011 and a consumption based measure of poverty we will focus on two fundamental and a consumption based measure of poverty we will focus on two fundamental goals of these measures to identify the most disadvantaged and to assess changes goals of these measures to identify the most disadvantaged and to assess changes

measuring the trends in inequality of individuals and families income and consumption we present evidence on the level of and trend in inequality from 1985 2010 in the united states using disposable income and consumption for a sample of individuals from the consumer expenditure ce survey differing from the findings in other recent research we find that the trends in income and consumption inequality are broadly similar between 1985 and 2006 but diverge during the great recession with consumption inequality decreasing and income inequality increasing given the differences in the trends in inequality in the last four years using both income and consumption provides useful information

consumption inequality in canada 1997 to 2009 we assess the evolution of consumption inequality in canada over the years 1997 to 2009 we correct the imputation of shelter consumption for homeowners to allow for unobserved differences in housing quality correlated with selection into rental tenure and we account for measurement error in this imputation using the annual survey of household spending for years 1997 to 2009 we find that household level consumption inequality measured by the gini coefficient increased from 0 251 to 0 275 over 1997 to 2006 between 2006 and 2007 consumption inequality may have decreased and over 2007 to 2009 consumption inequality was flat over the entire period of 1997 to 2009 consumption inequality increased moderately the gini coefficient for individual level consumption inequality followed a similar pattern though the changes were smaller in magnitude we also explore a possible correction for tail non response bias in inequality measurement and find that the increase in measured consumption inequality is robust to this correction

inequality leverage and crises the paper studies how high leverage and crises can arise as a result of changes in the income distribution empirically the periods 1920 1929 and 1983 2007 both exhibited a large increase in the income share of the rich a large increase in leverage for the remainder and an eventual financial and real crisis the paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes a financial crisis can reduce leverage if it is very large and not accompanied by a real contraction but restoration of the lower income group s bargaining power is more effective

development path of china and india and the challenges for their sustainable growth the segmentation of global manufacturing and services provided china and subsequently india with a golden opportunity to make full use of their absolute advantage low cost yet educated labour to integrate into the world economy within a comparatively shorter period of time than some earlier industrialisers though international trade functioned as a vent of surplus in view of the narrowness of their domestic markets at the beginning of their economic catch up the label of export led model may not reflect the real picture as imports underwent dramatic increases during their respective growth periods in particular for china foreign direct investment has played a pivotal role in their economic growth and has major presence in international trade and investment in leading sectors of both countries giving rise to certain special features and weak links for their economic expansion and sustainability of fast

on income convergence among china hong kong and macau hong kong and macau were reunited with china in the late 1990s as two special administrative regions sars over the last half century they were china s good examples of economic development windows of openness and investors owing to historical reasons china lagged far behind hong kong and macau in terms of per capita incomes however rapid economic growth in china over the last three decades must have brought about a significant convergence of the three economies china s economic success has benefited from the integration of its two sars and the coastal provinces especially guangdong in terms of technological spillover massive investment and trade the economic trickledown direct investment and trade must have been important drivers of economic integration and income convergence this paper aims to analyse the trend and studies the determinants of income convergence between china and its two sars both parametric and non parametric techniques are employed to quantify the pace of convergence on per capita incomes in hong kong macau and the chinese provinces over a period of more than 40 years we find no evidence of convergence in the pre reform period but strong evidence of both absolute and conditional convergence in the post reform period over the reform period the pace of convergence is less than 1 per cent per annum without controlling for trade and more than 2 per cent conditional on trade

technical change sectoral dislocation and barriers to labor mobility factors behind the great recession abstract the global financial and economic crisis which began in late 2007 great recession is the worst international crisis since 1929 great depression and still affects many countries this paper attempts to determine if the theory of extended crises presented by delli gatti et al 2012 is consistent with empirical evidence the analysis is carried out using two approaches the first part of the paper is purely descriptive and is dedicated to a comparison between structural differences and different patterns of development in six countries france germany italy spain uk and us using data on the major world economies klems and stan since 1970 we show that the fundamentals behind the extended crisis theory apply to these economies we focus particularly on italy germany and the us among large economies italy is one of the most affected and still not recovering even though the italian financial sector appeared to have been less exposed to the 2008 shock than other countries the crisis in italy could be directly connected to the failure of the italian economy to move to an economic system based on more skill intensive production in particular in the service sector as in the us the us financial sector was extremely exposed to the 2008 sub prime crisis but us economy recovered much faster than in many european countries germany is the leading european economy generally considered in european public debate as the example to be followed in the last part of the paper the analysis is broadened involving more countries in a panel analysis approach different specifications of panel probit logit models are presented in a first attempt to investigate the roles of both structural features and financial shock in explaining the extent of the crisis in different countries

the optimum quantity of money rule in the theory of public finance this paper examines optimal tax policy in a monetary economy in which money serves as an intermediate good that helps facilitate the conversion of scarce resources into tinal consumption goods by enabling consumers to economize on the costs of transacting it is shown that in such an environment even though distorting taxes must be levied for revenue purposes the optimal tax structure calls for abstaining from inflationary finance and adopting the optimum quantity of money rule

surviving the great recession the influence of income inequality in us urban counties abstractsurviving the great recession the influence of income inequality in us urban counties regional studies while there has been extensive research on the role of income inequality in economic growth there has been less investigation as to the role of income inequality on economic resilience this paper addresses the relationship between income inequality and resilience by evaluating the vulnerability of urban counties in the united states entering recession between 2006 and 2010 and tests whether income inequality contributes to their probability of recession survival a cox proportional hazards model is used to determine factors contributing toward urban counties resilience to the external shock of the great recession the research is focused on the relationship between the level of income inequality in a county and its recession risk it is found that areas with increased income inequality entered recession earlier

consumption and income inequality and the great recession abstract we examine changes in consumption and income inequality between 2000 and 2011 during the most recent recession unemployment rose and asset values declined sharply we investigate how the recession affected inequality while addressing concerns about underreporting in consumption data income inequality rose throughout the period from 2000 to 2011 the 90 10 ratio was 19 percent higher at the end of this period than at the beginning in contrast consumption inequality rose during the first half of this period but then fell after 2005 by 2011 the 90 10 ratio for consumption was slightly lower than it was in 2000

the great recession the treadmill of production and ecological disorganization did the recession decrease toxic releases across us states 2005 2014 abstract the treadmill of production ecological marxist steady state economics and the natural science literatures suggest that economic growth and pollution are linked we use the economic downturn resulting from the great recession in 2008 2009 as a natural experiment to test this hypothesis specifically we examine the effect of the great recession on pollution measured by the environmental protection agency s toxics release inventory tri using maps and fixed effects regression models for us states for the period 2005 2014 multivariate time series analysis demonstrates that even when adjusting for controls there is a unique and negative effect of the recession on tri levels we situate our findings in the relevant literature suggest possibilities for what the recession effect may be capturing and discuss some implications of increased pollution levels

financialisation oil and the great recession abstract this article addresses the role of world oil price hike of 2007 08 in serving to transform the financial and banking crisis into what is commonly referred to the great recession existing literature on the global crisis of 2007 09 tends to view it as a financial or banking phenomenon with analyses focusing mainly on state policies governance mechanisms and market dynamics in transforming the banking crisis of 2007 08 into the economic recession of 2008 12 13 although often attributing the global meltdown to wider phenomenon of financialisation rarely do existing perspectives delve into the role of the commodity sector in the global credit crunch in this paper we aim to fill this gap by inquiring into the role played by oil as a financial asset class in the political economy of the global crisis

the circular relationship between inequality leverage and financial crises in this paper we put into perspective the recent literature which points to inequality as a possible cause of credit bubbles by reintegrating it into a more general analysis on the two way relationship between inequality and finance we focus more specifically on situations where high inequalities and widespread access to credit coexist and argue that even when institutions maintain more or less equal access to finance there may be a dynamic positive circular relationship between inequality and financial development however even if there is some evidence in the literature of a positive causal impact of inequality on credit this does not preclude other important cofounding factors the conclusions concerning the distributional impact of finance are more ambiguous a survey of the empirical literature highlights several issues that must be tackled first endogeneity reverse causality and coincidental factors are major concerns second the choice of consistent measurements for the key variables both credit and inequality has strong empirical implications and must be grounded on relevant theoretical channels third those circular dynamics have substantial policy implications for emerging economies since an increasing number face a joint increase in inequality and credit

china coming to grips with the new global player this paper analyses china s economic performance in the last 25 years and discusses its prospect for growth in the future exports and investment have been the two driving forces for the high annual gdp growth rates fdi plays an important role however structural issues such as the loss making state owned firms and the fragile banking industry have to be solved monetary policy is complicated by the accumulation of reserves which however provide an insurance for the fragile banking system property rights a crucial element in transforming a communist society are far from being clearly developed major policy issues in the future include the correction of the distorted growth process and of the institutional deficits especially with respect to the rule of law and the lack of democracy

the role of financial systems for cross country differences in the link between income and consumption inequality abstractthis article discusses why consumption inequality stays low despite high income inequality in the u s but income inequality is closely followed by consumption inequality in china we show that different financial systems can play a critical role in shaping the cross country different links between income and consumption inequality this phenomenon is consistent with the cross country different relationships between income inequality and saving rates consumer credit expansion in the u s makes inequality much less serious for consumption than for income and this result holds to an even larger extent if more domestic credit can be financed by foreign savings but this is not the case in china whose financial system focuses only on investment and trade while neglecting liquidity constraints on consumption our assertions accord well with evidence found from the u s china and other related economies

household level effects of electricity on income abstract this paper studies the effect of electricity on income using the nepal living standards survey iii nlssiii carried out in the years 2010 11 to account for endogeneity issues we use a two stage probit least squares 2spls model we find that causality runs both ways that is income explains whether a household is connected to electricity but also a household being connected to electricity has a very large and significant effect on income

inequality credit and financial crises in the three decades leading up to the financial crisis of 2008 09 income inequality rose across much of the developed world this has led to a vigorous debate as to whether widening inequality was somehow to blame for the crisis by driving private sector credit booms despite growing interest empirical evidence on an inequality fragility relationship is limited based on a panel analysis of 18 oecd organisation for economic co operation and development countries for the years 1970 2007 this study provides evidence of a positive relationship between income concentration and private sector indebtedness once other traditional drivers are controlled for if confirmed the implications of this result are as follows i the view that the distribution of income is irrelevant to macroeconomic stability as implicit in mainstream approaches needs further investigation and ii in order to make the financial system more robust policy makers should cast the net wider than monetary policy and regulatory reforms and consider the effects of changes to distributive patterns

rising inequality changes in the distribution of income and consumption in the 1980s this paper examines changes in the distribution of income and consumption in the united states during the 1980s using data from the current population survey income and consumer expenditure survey consumption we reach three primary conclusions first changes in the distribution of consumption parallel changes in the distribution of income the lowest quintile of the consumption distribution received 0 9 percentage points less of total consumption in 1988 than in 1980 the corresponding decline for income was 0 6 percentage points second broad conclusions concerning recent changes in the consumption distribution are not very sensitive to the exact choice of a measure of family needs under a wide variety of alternative household equivalence scales there is a widening in the consumption distribution in the 1980s third the usc of consumption measures of well being in place of measures based on current money income docs change conclusions concerning the extent of poverty in the united stales using the official federal poverty thresholds we find that the overall consumption poverty rate was three percentage points below the income poverty rate in 1988 comparisons of the poverty rates of the elderly and the non elderly are substantially affected by the choice of poverty measure the consumption poverty rare for the elderly was only 60 percent of the rate for adults and one third of the rate for children in 1988 this abstract was borrowed from another version of this item

asymmetric surplus distribution and the price convergence path in posted offer markets a note abstract we report results from five posted offer experiments with firm specific quotas the average contract price converges from below the competitive equilibrium thus the independence of the contract price convergence path from surplus distribution is questioned in our results

a comparison of posted offer and double auction pricing institutions this paper presents an experimental study of a computerized posted offer pricing mechanism that captures many of the basic institutional features of retail exchange in the u s posted offer market performance is evaluated relative to double auction market performance using two supply and demand designs subject experience with the trading mechanism is explicitly considered as an experimental treatment variable the market data suggest that prices tend to be higher and efficiency lower under posted offer pricing relative to double auction however the institutional effect appears to interact with other design conditions when feasible the predictive power of competitive nash and limit price theoretic equilibria are empirically evaluated

urban development excessive entry of firms and wage inequality in developing countries this paper examines the short and long term effects of urbanisation via favourable urban development policies on income distribution and social welfare for a developing country in which the urban manufacturing sector is characterised by imperfect competition and free entry urbanisation shifts rural workers to the highly productive urban sector while causing production in urban firms to expand because of scale economies however urbanisation may worsen wage inequality between skilled and unskilled labour in the short term in the long term urbanisation can attract new firms to the urban sector and favourable urban development policies may result in excessive entry of firms which can amplify wage inequality in the economy this entry amplifying effect is confirmed empirically especially for low and lower middle income countries if the entry effect is not considered the impact of urbanisation on wage inequality could be understated by 13 for low and lower middle income countries

inequality in the labor market for native american women and the great recession this research paper builds on previous literature and documents general changes in the labor market for native american women that occurred during the great recession using extracts of data from the current population survey annual earnings file known as the merged outgoing rotation groups morg wages unemployment and other labor market variables for native american women are contrasted with those of native american men and white women to determine the relative change in labor market inequality that occurred during the great recession

the effect of credit on spending decisions the role of the credit limit and credibility the objective of the present research is to study consumer decisions to utilize a line of credit the life cycle hypothesis from economics argues that consumers should intertemporally reallocate their incomes over their life stream to maximize lifetime utility one form of intertemporal allocation is to use past income in the form of savings in the future a second form is the use of future income in the present this can only be done if consumers have access to a temporary pool of money that they can draw from and replenish in the future a function performed by consumer credit however our research reinforces prior findings that consumers are unable to correctly value their future incomes and that they lack the cognitive capability to solve the intertemporal optimization problem required by the life cycle hypothesis instead we argue that consumers use information such as the credit limit as a signal of their future earnings potential specifically if consumers have access to large amounts of credit they are likely to infer that their lifetime income will be high and hence their willingness to use credit and their spending will also be high conversely consumers who are granted lower amounts of credit are likely to infer that their lifetime income will be low and hence their spending will be lower however based on research in the area of consumer skepticism and inference making we also argue for a moderating role of the credibility associated with the credit limit specifically we argue that the above effect of credit availability would be particularly strong for consumers who believe that the credit limit credibly signals their future earnings potential i e a naive consumer who has limited experience with consumer credit however as consumers gain experience with credit they start discounting credit availability as a predictor of their future and start questioning the validity of the process used to set the credit limit hence with experience the effect of credit limit on the willingness to use credit should be attenuated we test these predictions in five separate studies in the first experimental study we manipulate credit limit and credibility and pose subjects with a hypothetical purchase opportunity consistent with our prediction credit limit impacted the propensity to spend but only when the credibility was high in the second experimental study we replicate these findings even when subjects were given information about their expected future salaries and also show that the credit limit influences their expectation of future earnings potential in the third study we show that the mere availability and increase of current liquidity cannot explain our findings in the fourth study we conduct a survey of consumers in which we measure a number of demographic characteristics and also ask them for their propensity to spend in a given purchase situation in the fifth study we use the survey of consumer finances scf dataset a triennial survey of u s families that is designed to provide detailed information on the use of financial services spending behaviors and selected demographic characteristics results from both studies 4 and 5 provide further support for our proposed framework credit limits influence spending to a greater extent for consumers with lower credibility younger consumers and less educated consumers across all studies we achieved triangulation by using a variety of approaches surveys and experiments subjects types young students and older consumers nature of predictor variables manipulated and measured dependent measures purchase likelihood credit card balance new charges and methods of analysis anova and regression and consistently found that increasing credit limits on a credit card increases spending especially when the credibility of the limit is high this paper joins a growing body of literature in marketing and behavioral decision theory that goes beyond the traditional domains of inquiry e g product choice effects of marketing mix variables and focuses on consumer decisions relating to the appropriate use of income to finance consumption our framework differs from prior research on the effect of payment mechanisms on spending in two significant ways first we are interested in the effects of the availability of credit on spending and not necessarily in the effect of the transaction format that is associated with each payment mechanism second while prior research has studied the point of purchase and historic i e prepurchase effects of credit the present research is concerned with the availability of credit in the future specifically our framework is invariant to the current and prior usage of credit by the consumer

income distribution in urban china during the period of economic reform and globalization this paper addresses three issues that are central to understanding the effects of the transition in china from central planning to a more market oriented economic system first what have been the consequences of the economic reforms for the distribution of income in urban areas second what has happened to the incidence of urban poverty third have government policies helped to diminish or accentuate urban poverty and inequality answers to these questions are based on a comparison of two national sample surveys conducted in 1988 and 1995

the inflation tax in a convex model of equilibrium growth a general equilibrium monetary economy is described that exhibits equilibrium growth the production technology is consistent with jones and manuelli 1990 and rebelo 1991 the inflation tax and nominal interest rates are shown to be inversely related to the equilibrium growth rates of real variables until a critical point is reached at this point equilibrium growth is eliminated and the predictions of stockman 1981 and abel 1985 concerning the level effects of distortionary monetary policies appear for the nominal side of the model a version of the prediction of friedman 1969 is shown to hold for a particular balanced growth path following king and rebelo 1990 a linear growth version of the model is calibrated to illustrate the potentially large growth and welfare effects of moderate inflations

consumption inequality and income uncertainty this paper places the debate over using consumption or income in studies of inequality growth in a formal intertemporal setting it highlights the importance of permanent and transitory income uncertainty in the evaluation of growth in consumption inequality we derive conditions under which the growth of variances and covariances of income and consumption can be used to separately identify the growth in the variance of permanent and transitory income shocks household data from britain for the period 1968 1992 are used to show a strong growth in transitory inequality toward the end of this period while younger cohorts are shown to face significantly higher levels of permanent inequality

real wages inflation and labour productivity in australia this paper presents an analysis of real wages inflation and labour productivity interrelationships using cointegration granger causality and most importantly structural change tests applications of tests to australian data over the 1965 2007 period corroborate the presence of a structural break in 1985 and show that a 1 percent increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0 5 and 0 8 percent comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance granger causality test results suggest that real wages and inflation both granger cause productivity in the long run

does the inequality credit crisis nexus exist an empirical re examination rajan claims that rising inequality led to financial crises through credit booms in the u s kumhof and ranciere provide a theoretical formulation for this hypothesis however their assertions are

consumption inequality between farm and nonfarm households in taiwan a decomposition analysis of differences in distribution consumption has been recognized as a more reliable indicator of household well being than income although a considerable body of literature has examined income inequality between farm and nonfarm households little is known about inequality in consumption this research aims to fill this knowledge gap by investigating consumption disparity between farm and nonfarm households using a nationally representative household survey from taiwan we apply an unconditional quantile regression based decomposition method to decompose the differences in the distribution of household expenditure between these farm and nonfarm households the results indicate that differences in the observed characteristics between these two types of households explain most of the consumption inequality moreover the difference in the education level of the farm operator household income and the degree of urbanization are particularly important jel classifications q10 q12

risk and return abstract this paper examines the seasonality in the basic relationship between expected return and risk during 1935 82 the results reveal that the positive relationship between return and risk is unique to january the risk premiums during the remaining eleven months are not significantly different from zero

financial stability at risk due to investing rapidly in renewable energy we present novel insights about effective energy policies using an agent based model the model describes relevant feedback mechanisms between technological evolution the interbank market and the electricity sector analysis with it shows that energy policies affect interbank connectivity and hence the likelihood of cascades of bank failures this effect has not been studied before in the literature in particular we find that investments in renewable energy reduce interbank connectivity increasing the probability of bank failures while raising taxes on energy has an opposite effect increasing the share of renewable energy in electricity production initially increases the price of electricity and thus improves profits and the ability to re pay debts of incumbent power plants however when the share of renewable energy increases too quickly financial stability may be at stake as the burden of financing investments in renewable energy offsets the improved profitability of existing power stations all in all this study provides a unique and novel perspective on the relationship between renewable energy investments and financial stability

income and consumption inequality in urban china 1992 2003 abstract using the nationally representative urban household income and expenditure survey uhies conducted by the national bureau of statistics nbs of china we document a steadily rising trend in income and consumption inequality during the period from 1992 to 2003 in urban china despite the rising urban inequality over time the social welfare of urban residents unambiguously improved because every income group saw their income and consumption increase over this period higher income groups experienced faster increases moreover consumption inequality follows income inequality very closely labor income inequality accounts for about two thirds of total income inequality quite consistently over time we find that only about one third of urban inequality can be attributed to observable individual choices and characteristics of which education has increasing explanatory power while regional differences become less important over time we also find that restructuring of the soe sector urbanization

market volatility and investor behavior it appears that speculative asset prices tend to show excess volatility relative to simple present value efficient markets models and that prices are partly forecastable as tending to returning to mean appropriately defined but what does this tell us about how speculative prices are determined are there fads in prices and if so how do they behave the question has arisen recently whether there is really room for fads in speculative prices whether or not speculative prices are too volatile if stock prices are highly correlated with dividends we might conclude that the movements in stock prices are driven by fundamentals not fads a question of longer standing is whether fads models that entail feedback from price change to price change are consistent with the observed approximate random walk price behavior that is rather low serial correlation of short run price changes we can also ask whether the feedback models are consistent with the observed relation of stock prices to dividends and earnings

the determinants of income inequality in oecd countries the objective of this paper is to identify the determinants of the increase in income inequality that oecd countries have experienced over the past two decades my hypothesis is that along with the financialisation of economies that has taken place since 1990 inequality increased because labour flexibility intensified labour market institutions weakened as trade unions lost power and public social spending started to retrench and did not compensate for the vulnerabilities created by the globalisation process using data from 25 high income oecd countries from 1990 to 2013 i empirically evaluate this hypothesis my results clearly suggest that the increase in inequality over the past two decades is caused by an increase in financialisation a deepening of labour flexibility the weakening of trade unions and the retrenchment of the welfare state

on economic theory and recovery of the financial crisis this paper presents a new economic theory to explain the evolution of a financial crisis and why a major crisis may take a long time to recover it suggests that asymmetric psychological reactions of market players to gains and losses are the principal cause of a crisis and responsible for prolonging recovery three different shapes of recovery v u and l are defined and explained during the current financial crisis some countries such as china and india may have a v shaped recovery others such as the uk and the us may have a u shaped recovery an important policy implication is that effective macroeconomic policies should be designed to smooth market movements and implementation of such policies has to be countercyclical rather than pro cyclical

fiscal policy in an endogenous growth model in a neoclassical growth model it is possible to make a case for public debt because a balanced growth path may be dynamically inefficient this paper shows that this possibility no longer holds in an endogenous growth model with constant external returns to capital it is shown that an increase in public debt reduces the growth rate so there always exists a future generation that will be harmed and that a reduction in public debt although it increases the growth rate cannot be pareto improving one current generation must be harmed

the role of life insurance in an emerging economy human capital protection assets allocation and social interaction abstract in this paper we provide micro econometric evidence on the determinants of life insurance demand in china the largest emerging market in the world we employ the china household income project chip dataset for the year 2002 in the analysis the timing is ideal because of the nature of the less well developed capital markets and social security systems in china in 2002 which sets a suitable stage to study the insurance demand behavior of emerging markets the results indicate that both the human capital protection motive and the asset allocation motive are important in explaining the purchase of life insurance in china in addition we present three empirical regularities 1 the positive correlation between the returns to human capital and the returns to market portfolio decrease the demand for life insurance 2 both the current wealth and future income of a household exert curvilinear impacts on life insurance demand 3 the breadth of a households social connections has substantial impacts on life insurance demand

labour share decline financialisation and structural change the purpose of this article is to explain the determinants behind the decline of labour share in the last three to four decades in oecd countries in our view this decline was determined by financialisation and was deepened by the structural changes that occurred almost simultaneously in those economies financialisation or finance dominated capitalism from the 1980s onwards was a key element in the strategic offensive of the advanced countries dominant classes to appropriate higher shares of national income and to restore their control over the political process a control that had been threatened by a generalised advancement of the labour movement in the 1970s the development of a finance dominated capitalism was helped by the process of globalisation which affected not only oecd countries but also many others a new though unstable macroeconomic model emerged which we will call financial capitalism in financial capitalism trade unions lost power vis a vis capital labour flexibility increased enormously and a structural change from manufacturing to services was accelerated in rich countries this resulted in negative consequences for labour share and income inequality after having provided a theoretical discussion of the determinants of the compression of the wage share making reference to the relevant literature we submit our hypotheses to empirical scrutiny performing a panel data analysis on 28 oecd countries the results of the estimations provide support to the theoretical argument

financial crisis and global imbalances its labour market origins and the aftermath the objective of this paper is to articulate how the 2007 09 economic crisis is rooted in the uneven income distribution and inequality caused by the current finance led model of growth the process of financialisation that took place in the 1980s in the usa and then in the european union was coupled with labour flexibility wage moderation and soaring profits the flexibility agenda of the labour market and the end of wage increases along with the contraction of indirect wages i e public social expenditure diminished workers purchasing power this was partly compensated with increased borrowing opportunities and the boom of credit consumption all of which helped workers to maintain unstable consumption capacity however in the long term unstable consumption patterns derived from precarious job creation job instability and poor wages have weakened aggregate demand hence labour market issues such as flexibility uneven income distribution poor wages and the financial crisis are two sides of the same coin both have a direct impact on the economic crisis and the current global imbalances copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

inflation and growth in an open economy this paper examines the relationship between growth and inflation in an open economy where private agents can transfer resources abroad to obtain endogenous growth we assume that the international credit market is imperfect we show that when the governments behave rationally the growth and inflation rates should not be correlated and that the optimal inflation rate can be found by setting the interest rate elasticity of money holdings equal to the tax rate elasticity of the tax base

monetary policy vagabonding liquidity and bursting bubbles in new and emerging markets an overinvestment view credit booms have globally fuelled hikes in stock raw material and real estate markets which have culminated in the recent us subprime market crisis we explain the global asset market booms since the mid 1980s based on the overinvestment theories of hayek wicksell and schumpeter we argue that ample liquidity supply originating in the large industrialized countries has contributed to overinvestment cycles in japan east asia new markets in the industrial countries and many emerging market economies expansionary monetary policies in response to the burst of bubbles are argued to have contributed to vagabonding bubbles around the globe

inequality saving and global imbalances a new theory with evidence from oecd and asian countries global imbalances are attributable to savings deficiency in some economies and savings glut in others the recent global crisis has triggered widespread social conflict over income inequality the inequality saving link has again become a pressing issue needing serious attention we present a new theory to explain why the link between inequality and saving is negative in oecd countries but positive in emerging asia we also offer an econometric analysis of differences in inequality saving links between those economies we find that aggressive financial services lead to a negative link by creating income illusion for overconsumption but imperfect financial markets contribute to a positive link by interacting with industrial policies as part of growth strategies while ignoring liquidity constraints on consumption

on the new economic policies promoted by the 17th ccp congress in china the 17th chinese communist party congress in october 2007 attracted attention within and outside china for the bold development agenda that was placed before delegates after 30 years of economic reform that has produced a remarkable improvement in living standards and china s reintegration into the world economy the party unveiled a programme that would push china to become a world superpower over the next 30 years china s ambition is to become a technologically innovative state to make china a moderately prosperous and harmonious society with a scientific outlook on development and to achieve full industrialisation and sustainable prosperity whether china is able to attain its objectives will critically depend on the party s ability to implement the new economic policies and address the social and political challenges that economic growth has created the aim of the paper is to examine the policies motivations and constraints that china faces in achieving the objectives laid out at the party congress

rising household debt its causes and macroeconomic implications a long period analysis the article analyses the rise in household indebtedness from the point of view of its causes and long run macroeconomic implications the analysis is focussed on the us case differently from life cycle interpretations of the phenomenon and from interpretations in terms of erratic deviations of current income flows from their long run trend the rising household debt is viewed as the outcome of persistent changes in income distribution and growing income inequalities through household debt low wages appear to have been brought to coexist with relatively high levels of aggregate demand thus providing the solution to the contradiction between the necessity of high and rising consumption levels for the growth of the system s actual output and a framework of antagonistic conditions of distribution which keeps within limits the real income of the vast majority of society the question of the long run sustainability of this substitution of loans for wages is finally discussed copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

financial globalisation and emerging markets volatility the volatility of capital flows to emerging market em countries and frequency of financial crises have imposed high welfare costs on the countries involved the empirical literature provides at best a mixed picture on the relationship between long run em country growth and financial integration meanwhile the prevailing policy discourse regarding reform of the international financial system remains incomplete the focus has largely been on either institutional and policy measures required of em countries or international crisis resolution procedures the role played by private financial markets and institutions in the developed world has not received adequate attention this paper describes some of the structural features inherent in today s financial markets that directly contribute to the instability in em capital flows

firm specific output limits in a posted offer market distributive and efficiency effects abstract in this paper we look at the effect of the removal of firm specific binding and non binding quotas in experimental posted offer markets in the experiments we see that the effect of both binding and non binding quotas is carried over to the deregulated regime the effect of non binding quotas while being in effect on the number of contracts is statistically significant we also see that distribution of surplus may actually affect the convergence path of prices that is with binding quotas price convergence is observed from below the competitive equilibrium