institutional determinants of labor reallocation in transition the transition process differed in the countries of the former soviet union fsu and those of central and eastern europe cee in terms of reallocation of labor real wage employment and output adjustment we sift through the theoretical and empirical literature to find an explanation for these diverging adjustment trajectories and conclude that they can be explained by the fact that the cee countries adopted social policies that upheld wages at the bottom of the distribution forcing the old sector to restructure or collapse while the fsu countries allowed wages to free fall not forcing the hand of the old sector

finance inflation and employment a post keynesian kaleckian analysis the purpose of this paper is to contribute to the post keynesian kaleckian macroeconomic literature we develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt interest plus principal repayment into the consumption and investment expenditures as well as into the inflation generating process we explore the way that finance influences the distribution effects of inflation in the demand side of a money credit using economy we suggest a new phillips curve that encapsulates the impact of financial commitments on wage and profit claims we argue that high debt and cash payment commitments are likely to be associated with a positive demand side effect of inflation on the rate of employment and that they might be conducive to a negative supply side effect of employment on the inflation rate the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved

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 global financial crisis explaining cross country differences in the output impact abstract what explains differences in the crisis impact across developing countries and emerging markets using cross country regressions to assess the factors driving the growth performance in 2009 compared to pre crisis forecasts for that year we find that a small set of variables explain a large share of the variation in the growth impact countries with more leveraged domestic financial systems stronger credit growth and more short term debt tended to suffer a larger effect on economic activity although the relative importance of these factors differs across country groups for emerging markets this financial channel trumps the trade channel for a broader set of developing countries however the trade channel seems to have mattered with more open countries affected more strongly and those exporting food commodities being less hard hit exchange rate flexibility helped in buffering the impact of the shock particularly for emerging markets there is also some evidence that countries with a stronger fiscal position prior to the crisis were impacted less severely we find little evidence for the importance of other policy variables

more mortgages lower growth in newly collected data on 46 economies over 1990 2011 we show that financial development since 1990 was mostly due to growth in credit to real estate and other asset markets which has a negative growth coefficient we also distinguish between growth effects of stocks and flows of credit we find positive growth effects for credit flows to nonfinancial business but not for mortgage and other asset market credit flows by accounting for the composition of credit stocks and for the effect of credit flows we explain the insignificant or negative growth effects of financial development in recent times what was true in the 1960s 1970s and 1980s when the field of empirical credit growth studies blossomed is no longer true in the 1990s and 2000s new bank lending is not primarily to nonfinancial business and financial development may no longer be good for growth these trends predate the 2008 crisis they prompt a rethink of the role of banks in the process of economic growth jel e44 o16 o40 c33

transition economies performance and challenges i present data and assess the first twelve years of the transition from plan to market transformations have taken place but the income gap between the transition and advanced economies has widened transition countries further east have performed worse than those further west but policies matter all countries carried out quickly type i reforms such as macroeconomic stabilization price liberalization small scale privatization and breakup of state owned enterprises they differed in type ii reforms such as large scale privatization and development of banking and legal systems countries that developed a functioning legal framework and corporate governance have performed better than others

the myth or folly of the 3 deficit gdp maastricht parameter a relation is presented defining the boundary algebraically and geometrically to the sustainability area of public finance the relation and area involve three magnitudes deficit gdp debt gdp and rate of growth it is shown that the parameters stated in the famous annex to the maastricht treaty 60 percent for the debt gdp ratio and 3 percent for the deficit gdp ratio represent only one particular point on the above mentioned boundary relation to the sustainability area there exists an infinite number of other points sharing the same characteristics on the basis of the oecd data referring to the end of 1996 it is shown that all major european countries find themselves outside the sustainability area except belgium and italy i e exactly the opposite of what is widely believed to be the case in current discussions copyright 1998 by oxford university press

income distribution and the size of the financial sector a sraffian analysis the recent expansion of the financial sector has been accompanied by deregulation an acceleration of financial innovation and changes in income distribution the size of these phenomena has attracted the attention of the literature a large part has analysed the relationship between financial development and inequality arguing that the former tends to reduce the latter for a review of this literature see demirguc kunt and levine 2009 it moves from the claim that perfect credit markets reduce inequality by bringing about the efficient exploitation of personal qualities material endowments and the growth potentials of the economy credit market imperfections hold back the achievement of these results but are counteracted by deregulation and financial innovation which tend to eliminate rent positions

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

does the current account still matter do global current account imbalances still matter in a world of deep international financial markets where gross two way financial flows often dwarf the net flows measured in the current account contrary to a complete markets or consenting adults view of the world large current account imbalances while very possibly warranted by fundamentals and welcome can also signal elevated macroeconomic and financial stresses as was arguably the case in the mid 2000s furthermore the increasingly big valuation changes in countries net international investment positions while potentially important in risk allocation cannot be relied upon systematically to offset the changes in national wealth implied by the current account the same factors that dictate careful attention to global imbalances also imply however that data on gross international financial flows and positions are central to any assessment of financial stability risks the balance sheet mismatches of leveraged entities provide the most direct indicators of potential instability much more so than do global imbalances though the imbalances may well be a symptom that deeper financial threats are gathering

unemployment and the social safety net during transitions to a market economy evidence from the czech and slovak republics the authors investigate the remarkably short unemployment spells in the czech republic compared to slovakia and other central and east european economies they estimate hazard functions and find that 40 to 5o percent of the difference in unemployment durations between the two republics is accounted for by differences in demographics and demand conditions the remainder is explained by differences in coefficients proxying the behavior of firms individuals and institutions in both republics the unemployment compensation system has a moderately negative effect on the exit rate from unemployment policymakers hence have latitude in providing adequate social safety nets without jeopardizing efficiency copyright 1998 by american economic association

solvency rule versus taylor rule an alternative interpretation of the relation between monetary policy and the economic crisis one of the more debated interpretations of the economic crisis that started in 2007 08 is based on the taylor rule equation namely the idea that over the period 2002 05 the fed has implemented a low interest policy that has led to the housing bubble and finally to the great recession this paper shows that the taylor rule equation not only rests on the so called new consensus macroeconomics but also on the neoclassical theory of growth the various criticisms raised against these theoretical foundations suggest that interpretations of the great recession based on the taylor rule equation are building their arguments on shaky theoretical premises furthermore this paper shows that an equation formally similar but logically alternative to the taylor rule can be regarded as the expression of a general condition of solvency of firms and workers according to this solvency rule the prevailing outcome of monetary policy decisions is the regulation of insolvencies

the great mortgaging housing finance crises and business cycles this paper unveils a new resource for macroeconomic research a long run dataset covering disaggregated bank credit for 17 advanced economies since 1870 the new data show that the share of mortgages on banks balance sheets doubled in the course of the twentieth century driven by a sharp rise of mortgage lending to households household debt to asset ratios have risen substantially in many countries financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries housing finance has come to play a central role in the modern macroeconomy

a simple solution to the identification problem in detailed wage decompositions i introduction oaxaca and ransom 1999 show that the oaxaca decomposition suffers from one nagging conceptual problem the detailed oaxaca decomposition of wage differentials is not invariant to the choice of reference group when dummy variables are used 1 that is if one uses dummy variable s then the detailed coefficients effect attributed to dummy variables is not invariant to the choice of the omitted group s 2 this invariance or identification problem is well known to labor economists and has plagued decomposition and discrimination analysis for a long time 3 this article proposes a simple and practical solution to this identification invariance problem the solution is based on the intuitive idea that if alternative reference groups yield different estimates of the characteristics and coefficients effects for each individual variable then it is natural to obtain estimates of the two effects for every possible specification of the reference groups and take the average of the estimates of the two effects with various reference groups as the true contributions of individual variables to wage differentials a close inspection shows that averaging the two effects in the decomposition equation with varying reference groups the averaging approach is equivalent to finding average estimates of constant and dummy variables in wage equations with varying reference groups and then using the average estimates to calculate the oaxaca decomposition equation researchers may react a bit negatively to this suggestion because it could be quite cumbersome and tedious to estimate wage equations permuting the choice of reference groups this article shows that there is no need to estimate multiple wage equations one set of regression estimates is sufficient to resolve the identification problem in the detailed decompositions that is the average of the estimates with varying reference groups can be easily calculated by using only one set of regression estimates with any specific reference group s the identification problem for the detailed decomposition disappears once the contribution of the dummy variables and the constant in the regression equations are identified 4 ii identification problem and invariant decomposition an illustration to understand what the identification problem in the detailed wage decomposition is i will first illustrate the problem with a simple example suppose that there are three categories and the regression equation has only a constant and two dummy variables on the right hand side where the reference group is the first category 5 that is 1 y sub i alpha sub i 3 summation over k 2 d sub ki beta sub ki e sub i where y is log wages and i a or b for two comparison groups coefficients for two dummy variables taking category one as the reference group are estimated using ordinary least squares ols regression and are reported in the second column of table 1 for sample a and for sample b note that the coefficient of the reference group category 1 is restricted to zero similarly i may change my reference group specification and estimate the wage equation two more times the estimates taking category 2 or 3 as the reference group are reported on the next two columns because i have three sets of estimates with varying reference groups i may decompose the wage differentials 0 15 0 76 0 61 into characteristics and coefficients effects three times the characteristics effect delta sub x 1 and coefficients effects delta sub beta 1 are specified as follows when category 1 is the reference group delta sub x 1 summation sup 3 sub k 2 bar d sub ka bar d sub kb beta sub kb and delta sub beta 1 alpha sub a alpha sub b summation sup 3 sub k 2 bar d sub ka beta sub ka beta sub kb

an unproductive labour view of finance the present paper discusses the role of the financial sector in a capitalist economy arguing that the huge increase in its weight economic and otherwise in the last decades is not justified by the importance of its contribution to economic growth the point is developed going back to the classical concepts of productive and unproductive labour there are two dimensions of these concepts that we discuss the first links the social efficiency of the financial sector to its role in the reproduction process crucially distinguishing basic from non basic uses we argue that many financial services usually seen as services to production really consist of the provision of gambling facilities and thereby have to be considered at best as luxury goods when evaluated according to its reproductive capability the service of arranging a gambling house cannot be seen as producing social value a second sense in which the discussion of productive and unproductive labour casts light on the nature of some financial services is that connected to the conception of pure circulation costs as different from costs of production proper the amount of circulation costs varies with the varying intensity of the realisation problem they are not defined by the production technique and are in this sense arbitrary copyright oxford university press

leading indicators of crisis incidence evidence from developed countries abstract we examine which indicators are most useful in explaining the cost of economic crises in eu and oecd countries between 1970 and 2010 to define the dependent variable we combine a measure of costs to the economy which consists of the output and employment loss and the fiscal deficit with a database of crisis occurrence designed specifically for this task we take into account model uncertainty in two steps first for each potential leading indicator we select the relevant prediction horizon by using panel vector autoregression second we identify the most useful leading indicators with bayesian model averaging our results suggest that domestic housing prices share prices and credit growth and some global variables such as private credit constitute important sources of risk

the impact of the 1981 and 1994 1995 strikes on major league baseball attendance a time series analysis protracted labour disputes in professional team sports have become increasingly common in the past 30 years although each of the four major professional team sports in the usa have experienced episodes of labour strife major league baseball has the longest and most frequent experience with labour management conflict fans and the media claim with each incident permanent harm is done to baseball s standing as the national pastime the purpose of this paper is to ascertain whether such claims can be supported by the empirical evidence utilizing time series analysis aggregate attendance at professional baseball games is examined the evidence presented suggests that although the most protracted periods of labour discord had short term impacts on attendance there is no empirical evidence that these exogenous shocks had any long term effects

the effects of labour strikes on consumer demand in professional sports revisited previous research has concluded that the 1981 and 1994 1995 major league baseball mlb strikes have caused short term losses in attendance but have not resulted in any long term effects on attendance while total attendance at mlb games following the 1994 1995 strike has recovered to its pre strike levels this has been done only through the construction of new stadiums at an unprecedented pace which cannot continue into the future after accounting for stadium effects average mlb baseball attendance has dropped significantly since the 1994 1995 strike

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

financial deregulation and household saving the last decade has seen widespread domestic financial deregulation in the industrial world particularly in the united states united kingdom and the nordic countries resulting in an increase in competition both between banks and saving institutions thrifts or building societies as they moved into each others services and within each sector this opened up new financial options particularly for households the sector that was probably most affected by government regulation for example there was a significant increase in equity withdrawals from personal housing wealth in both the united kingdom and united states over the ig8os 2 this period also saw a significant change in household consumption behaviour the most dramatic illustration being the fall in the household saving ratio in those countries where the process of deregulation has gone furthest this paper reports the results from estimating a model of household saving using regional data for the united kingdom with a particular emphasis on the interaction between household saving and financial deregulation the estimates are used to calculate the relative importance of different factors in the fall in personal saving over the i98os i conclude that deregulation lowered the equilibrium level of saving over the i98os probably 2 percentage points per annum as well as making saving significantly more dependent on changes in wealth income and real interest rates there have been a number of earlier empirical studies looking at the interaction between financial deregulation and household behaviour manchester and poterba i 989 miles i 992 and koskela et al i 992 present empirical evidence on the interaction between deregulation the housing market and saving in the united states united kingdom and finland respectively others have estimated saving functions which include variables representing the effects of financial deregulation or have considered the impact of financial deregulation on liquidity constraints in consumption 3 the

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

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

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

did inequality cause the u s financial crisis in his widely discussed book fault lines 2010 raghuram rajan argues that many low and middle income consumers have reduced their saving and increased debt since income inequality started to soar in the united states in the early 1980s this has temporarily kept private consumption and employment high but it also contributed to the creation of a credit bubble this surge in household indebtedness turned out to be unsustainable in the financial crisis starting in 2007 although rajan and others emphasize the role of government in promoting credit to those households with declining relative permanent incomes other strands of the literature have focused more explicitly on the implications of rising inequality for aggregate demand and households demand for credit these differences in emphasis may explain why the literature on the inequality crisis nexus appears somewhat disparate even though the various strands are far from mutually exclusive but rather complement each other we therefore place the rajan hypothesis in the context of competing theories of consumption and survey the empirical literature on the effects of inequality on household behaviour we conclude that the empirical evidence calls for a renaissance of the relative income hypothesis of consumption

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

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

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

studying the effects of household and firm credit on the trade balance the composition of funds matters i introduction the implications of higher levels of financial development have been investigated in a large number of studies both in the empirical growth and in the financial crisis literatures 1 a widely used indicator of financial development is the relative importance of loans issued by commercial banks and other financial intermediaries to the entire private sector that is the private credit to gross domestic product gdp ratio following the definition by king and levine 1993a 1993b a higher level of private credit indicates better developed financial markets and easier credit access for businesses and households yet these two types of borrowers vary in terms of the use of credit and might have different effects on macroeconomic performance in this article we study the link between the components of private credit and the trade balance we focus on the distinction between household and corporate sector credit and investigate whether these two types of credit have adverse effects on the trade balance of goods and services this article builds on a theoretical framework by backus kehoe and kydland 1994 who study the dynamics of the trade balance we extend their work by assuming two types of households one being credit constrained due to enforcement problems we then ease the credit constraints on households and firms and study the hypothesized effects by comparative statics analysis more specifically we argue that an increase in household credit raises the demand for consumption goods whereas firm credit growth raises the demand for investment goods while both can have a negative impact on the trade balance the difference is important because borrowing to finance consumption does not add to the productive capacity of an economy and to greater export earnings frankel and rose 1996 firm credit on the other hand has the potential to increase investment by relaxing the credit constraints on firms thus increasing exports and trade balance exploring the decomposition of private credit in emerging countries is relevant for several reasons first the effects of the increased level of household credit in emerging economies are still ambiguous on the one hand better access to credit helps credit constrained households to smooth out their consumption on the other hand it boosts spending and hence decreases savings in an influential paper japelli and pagano 1994 show that liquidity constraints on households raise the saving rates they also find empirical evidence that an increase in household credit decreases saving rates for a sample of organization for economic cooperation and development oecd countries yet the effects of household credit in emerging economies have not been explored second if we find that household and firm credit have different impacts on the trade balance of goods and services this underlines the importance of the decomposition of private credit which will also have key implications for the financial development growth link the level of private credit in emerging economies has been rising steadily after the financial liberalization process that took place in early 1990s however higher levels of total private credit do not necessarily imply higher levels of firm credit in fact data for emerging economies show that household credit rather than firm credit has been rapidly increasing in the past decade the higher share of household credit in the total private credit can crowd out investment especially in countries where stock and bond markets are not well developed to finance investment finally a possible negative link between household credit and trade balance has important policy implications for emerging economies as argued by wood 1997 the international monetary fund continues to place most emphasis within its programmes on the stabilisation objective and therefore the core of imf programmes continues to be based upon the restriction of domestic credit creation

employment determination in enterprises under communism and in transition evidence from central europe the authors present a comparative analysis of employment determination in four transition economies as they moved from central planning to a market economy in the early 1990s they use firm level panel data sets from the czech republic hungary poland and slovakia to estimate dynamic employment equations for the period from immediately before to immediately after the start of transition for the most part firms appear to have been quick to adjust employment to wage levels and there is little evidence of labor hoarding there were important cross country variations in the determinants of employment during the reform process however hungarian and polish firms started the transition already substantially reformed and became even more responsive to market signals as transition proceeded in contrast firms in the czech and slovak republics started in the completely unresponsive mode characteristic of central planning but rapidly caught up with their counterparts in hungary and poland

recent trends in insured and uninsured unemployment is there an explanation this paper explores the recent decline in the fraction of unemployed workers who receive unemployment insurance benefits using march current population surveys we compare the fraction who are potentially eligible for benefits with the fraction who receive them the decline in insured unemployment is almost entirely due to a decline in the early 1980s in the takeup rate for benefits we analyze the determinants of the takeup rate using both aggregated state level data and micro data at least half the decline is due to an increasing share of unemployment in states with lower takeup rates

the impact of labor strikes on consumer demand an application to professional sports the primary bargaining power of organized labor is its ability to withdraw labor from the rm in the form of a strike from the workers perspective a strike is intended to impose substantial costs upon the rm over time as these costs accumulate the rm develops an appreciation of the solidarity of labor and may eventually surrender to the demands of the workers orley c ashenfelter and george e johnson 1969 note that the strike also serves the function of informing the workers to the reality of the rm s position although the union leadership may recognize early in negotiations that the rm cannot or will not meet the workers demands the rank and le of the union often do not understand the impracticality in their position until the workers have struck and the rm fails to surrender whether strikes ultimately serve as a lesson to workers or rms is partially impacted by the extent to which such events impart costs upon both the rm and the industry for example brian e becker and craig a olson 1986 examined the relationship between worker strikes and changes in shareholder equity these authors found that on average a strike of at least 1 000 workers would reduce shareholder equity by 4 1 percent richard a de fusco and scott m fuess jr 1991 examined airline carriers and found that strikes tended to redistribute wealth from shareholders of those airlines which experienced a strike to shareholders of airlines that had management labor peace furthermore richard mchugh 1991 investigated the impact of a labor strike on both the rm and organizations linked as purchasers or suppliers surprisingly the impact of the strike was greater for the linked rm than it was for the rm directly experiencing the worker strike each of the aforementioned studies found that strikes impose costs on the rm these costs generally centered on the loss of output the rm experienced during the duration of the management labor con ict previous studies have largely neglected the possible extended costs associated with the reactions of the remaining party impacted by the worker strike the consumer although in many industries rms can increase inventories prior to a worker strike this is not true in all industries within the airline industry for example labor strikes temporarily force consumers to either consume the production of other suppliers or live without the particular good or service this outcome leads to the question we investigate do work stoppages permanently impact consumer demand when the struck rm is unable to meet demand during the labor strike a natural setting to explore this issue is the professional sports industry in such an industry worker strikes can completely remove the output from the consumer s consumption basket unlike strikes in other industries though consumers of the output from the professional team sports industry frequently threaten to withdraw all future demand if worker strikes are not avoided or ended quickly this threat has led industry insiders to claim that labor strikes might destroy the professional sports league experiencing management labor dif culty

a supermultiplier stock flow consistent model the return of the paradoxes of thrift and costs in the long run supermultiplier models have been recently brought to the post keynesian debate yet these models still rely on quite simple economic assumptions being mostly ow models which omit the nancial determinants of autonomous expenditures since the output growth rate converges in the long run to the exogenously given growth rate of non capacity creating autonomous expenditure and the utilization rate moves towards the normal utilization rate the paradoxes of thrift and costs remain valid only as level e ects average growth rates this paper investigates whether the core conclusions of supermultiplier models hold in a more complex economic framework described by means of a supermultiplier sfc model in which private business investment is assumed to be completely induced by income while the autonomous expenditure component in this case consumption out of wealth becomes endogenous the results of the numerical simulation experiments suggest that the paradox of thrift can remain valid in terms of growth e ects and that a lower pro t share can also be associated to a higher accumulation rate though with a lower pro t rate

the political economy of transition the overriding importance of political constraints in the transition process has led to developments of the theory of the political economy of reform what are the main insights from that theory how does it reflect the transition reality what have we learned and what do we still need to learn the present article will attempt to answer those questions

external imbalances in the eurozone the paper examines the extent to which current account imbalances of euro area countries are related to intra euro area factors and to external trade shocks we argue that the traditional explanations for the rising imbalances are correct but are incomplete we uncover a large impact of declines in export competitiveness and asymmetric trade developments vis a vis the rest of the world x96 in particular vis a vis china central and eastern europe and oil exporters x96 on the external balance of euro area debtor countries while current account imbalances of euro area deficit countries vis a vis the rest of the world increased they were financed mostly by intra euro area capital inflows in particular by the purchase of government and financial institutions securities and cross border interbank lending which permitted external imbalances to grow over time ruo chen gian maria milesi ferretti and thierry tressel

credit cycle coherence in the eurozone was there a euro effect this paper examines effects of the euro introduction on credit cycle coherence in the eurozone through six channels we construct and describe credit cycles for total bank credit household mortgages and non financial business loans for 16 emu economies over 1990 2015 credit cycle coherence is measured by synchronicity of cycle movements and similarity of their amplitudes we find that the effect of euro introduction runs through elimination of currency risk and higher capital flows which decrease coherence of total credit and mortgage credit cycles but increase coherence of business credit cycles falling interest rates contribute to the convergence of total and mortgage credit cycles financial deregulation and legal harmonization are associated with lower coherence of all credit cycles while trade openness has the opposite impact the findings impinge on monetary policy effectiveness in the eurozone with implications for macroprudential policy

turning back the clock in baseball the increased prominence of extrinsic rewards and demand for authenticity this paper addresses why customers at times prefer traditional practices deemed more authentic to a domain particularly where these practices had previously been discarded as inferior i argue that customer demand for authenticity can be triggered when extrinsic rewards i e fame or money increase in prominence in a market causing audiences to doubt the motives of the market s producers i examine this dynamic in the context of major league baseball where appreciation for traditional stadium features seemingly arose after the advent of free agency heightened awareness and coverage of the economic rewards in the sport experimental analysis validates the proposed mechanism whereby increased fan exposure to extrinsic rewards increases concern about player inauthenticity which increases preference for traditional stadium features quantitative analysis of attendance patterns provides external validation for these experimental findings by showing that authenticity was more highly preferred in the for

inequality the great recession and slow recovery rising inequality reduced income growth for the bottom 95 percent of the income distribution beginning about 1980 but that group s consumption growth did not fall proportionally instead lower saving led to increasing balance sheet fragility for the bottom 95 percent eventually triggering the great recession we decompose consumption and saving across income groups the consumptionincome ratio of the bottom 95 percent fell sharply in the recession consistent with tighter borrowing constraints the top 5 percent ratio rose consistent with consumption smoothing the inability of the bottom 95 percent to generate adequate demand helps explain the slow recovery

profit growth in boom and bust the great recession and the great depression in comparative perspective the great recession of 2007 2009 and the great depression of the 1930s were triggered by the collapse of asset price bubbles however preexisting structural imbalances in the us economy were the reason why the burst of speculative bubbles induced a general economic collapse this article argues that the imbalance created by the combination of stagnant labor earnings and surging corporate profits not only played a leading role in the run up to the downturns but also was chiefly responsible for the slow recoveries on the one hand the relative stagnation of labor income represented a key factor behind rising income inequality and a potential drag on consumption which was temporarily alleviated by credit expansion hence the rising household debt levels eventually became unsustainable on the other hand rising corporate profits created an overhang of idle money eager to lend itself to speculative ventures which played a key role in fueling the stock market bubble of the 1920s and the housing bubble of the 2000s the article further argues that despite various superficial and deeper similarities between the circumstances surrounding the great recession and the great depression some fundamental differences in the structure of the us economy then and now suggest vastly different future prospects for american capitalism

the employment dynamics of disadvantaged women evidence from the sipp understanding the employment dynamics of disadvantaged families is increasingly important we estimate duration models describing these dynamics for disadvantaged single mothers and use them to conduct a rich set of counterfactual analyses we use a misreporting model to correct for seam bias the problem that too many transitions are reported between reference periods in panel data we find effects of demographics minimum wages unemployment rates and maximum welfare benefits but not policy changes introduced through state welfare waivers on employment dynamics we find that two commonly used ad hoc methods of addressing seam bias perform substantially worse than our approach

demand driven inequality endogenous saving rate and macroeconomic instability this article examines consumption dynamics in a cambridge model of growth and distribution the model endogenises the workers saving rate and incorporates out of equilibrium dynamics explicitly the analysis identifies a new mechanism of macroeconomic instability that emerges from the interaction between the kaldorian process of demand driven inequality and the workers saving behaviour the mechanism can generate perpetual cycles where the upwards phase is characterised by a prolonged period of falling saving rate and increasing income inequality the article discusses the empirical relevance of the formal analysis the article discusses the empirical relevance of the analytic results

the impact of financialisation on the wage share a theoretical clarification and empirical test it is frequently asserted that financialisation has contributed to the decline in the wage share this paper provides a theoretical clarification and a systematic empirical investigation we identify four channels through which financialisation can affect the wage share 1 enhanced exit options of firms 2 rising price mark ups due to financial overhead costs for businesses 3 increased competition on capital markets and shareholder value orientation and 4 the role of household debt in increasing workers financial vulnerability and undermining their class consciousness the paper compiles a comprehensive set of empirical measures of financialisation and uses it to test these hypotheses with a panel regression of 14 oecd countries over the 1992 2014 period we find strong evidence for negative effects of financial liberalisation and financial payments of non financial corporations on the wage share that are in the same order of magnitude as the effects of globalisation

government policies and financial crises mitigation postponement or prevention in the aftermath of the great recession governments have implemented several policy measures to counteract the collapse of the financial sector and the downswing of the real sector within a framework of minsky veblen cycles where relative consumption concerns a debt led growth regime and financial sector confidence constitute the main causes of economic fluctuations we use computer simulations to assess the effectiveness of such measures we find that the considered policy measures help mitigate the impact of financial crises though they do so at the cost of shortening the time between financial crises this result is due to a relatively fast recovery of solvency and confidence induced by the policy measures under study which contribute to an increase in private credit and thereby effective demand our results suggest that without the strengthening of financial regulation any policy intervention remains incomplete

do capital flows change domestic credit allocation since the 1990s domestic bank credit has been reallocated away from lending to non financial business and toward households an expanding literature discusses negative effects on growth and stability of this change in credit allocation we research its drivers we hypothesize that if foreign capital flows into economies with few investment opportunities it may substitute for domestic bank lending to non financial business so that bank balance sheets become more dominated by household lending in gmm estimations on data for 36 economies over 1990 2011 we find evidence consistent with this mechanism foreign capital inflows into the non bank sector but not into the bank sector are associated with lower shares of business lending in domestic bank portfolios the association is weaker in economies with more investment opportunities whether proxied by investment shares current account surpluses or emu membership our results highlight the importance of sectoral destination in determining the effects of capital flows

owners incentives during the 2004 05 national hockey league lockout this study shows that firm owners can indirectly benefit from work stoppages if they own other firms in substitute industries and gain market power for those other firms the incentives of the owners are examined with a model of cross ownership cartels and data from professional sports assuming that various professional sport events are substitutes owners may increase profits by eliminating competition even if they own the competition this study shows that the recent national hockey league nhl lockout caused a statistically significant increase in attendance for the national basketball association and junior hockey leagues given that many nhl owners own teams in these substitutable leagues this could be construed as anti competitive behaviour and may have prolonged the nhl lockout and helped nhl owners in collective bargaining given the public investment in sports facilities and market power in professional sports this analysis calls for cross ownership across professional sports to be questioned

job reallocation in two cases of massive adjustment in eastern europe summary this paper uses worker level data to characterize economy wide job creation and job destruction during periods of massive structural adjustment we contrast the gradualist czech and the rapid estonian approach to the destruction of the communist economy and assess their experience in light of selected theories of reallocation with frictions we find that gradual job destruction combined with job creation support allows extensive reallocation to concur with low unemployment drastic job destruction on the other hand need not slow down job creation as long as unemployment benefits are kept very low

domestic credit growth and international capital flows during the pre crisis period europe experienced substantial cross country variation in domestic credit growth and cross border capital flows we investigate the inter relations between domestic credit growth and international capital flows during the period 1993 2008 with a special focus on the boom period of 2003 2008 we establish that domestic credit growth in european countries is strongly related to net debt inflows but not to net equity inflows this pattern also holds for an extended sample of 54 advanced and emerging economies

cross country experiences and policy implications from the global financial crisis the financial crisis of 2007 2008 is rooted in a number of factors some common to previous financial crises others new analysis of post crisis macroeconomic and financial sector performance for 58 advanced countries and emerging markets shows a differential impact of old and new factors factors common to other crises like asset price bubbles and current account deficits help to explain cross country differences in the severity of real economic impacts new factors such as increased financial integration and dependence on wholesale funding help to account for the amplification and global spread of the financial crisis our findings point to vulnerabilities to be monitored and areas of needed national and international reforms to reduce risk of future crises and cross border spillovers they also reinforce a sad state of knowledge much of how crises start and spread remains unknown stijn claessens giovanni dell ariccia deniz igan and luc laeven

why do women have longer durations of unemployment than men in post restructuring urban china this paper provides the first systematic analysis of the reasons why women endure longer unemployment durations than men in post restructuring urban china this analysis is based upon data obtained from a national representative household survey rejecting the view that women are less earnest than men in their desire for re employment this analysis shows that women s job search efforts are handicapped by a lack of access to social networks unequal entitlement to social re employment services higher earnings losses from job separations for women and unfair treatment of women with respect to mandatory retirement

financialisation and tendencies towards stagnation the role of macroeconomic regime changes in the course of and after the financial and economic crisis 2007 09

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

spatial competition and strategic firm relocation firms compete spatially for customers who have some degree of brand loyalty the number and attractiveness of the alternatives available to these customers dictates the level of competition facing firms in this study data on ticket pricing in four professional sports leagues are used to empirically examine the existence of spatial competition in sports and the impact of space on team relocations results allowing for structural breaks over time while using spatial autoregressive techniques suggest that sports franchises spatially compete when pricing their tickets and that spatial characteristics including the level of spatial competition have influenced the relocation of teams jel d40 l11 r30 l83

what can we learn from the implementation of monetary and macroprudential policies a systematic literature review the emergence of macroprudential policies implemented by central banks as a means of promoting financial stability has raised many questions regarding the interaction between monetary and macroprudential policies given the limited number of studies available this paper sheds light on this issue by providing a critical and systematic review of the literature to this end we divide the theoretical and empirical studies into two broad channels of borrowers consisting of the cost of funds and the collateral constraint and financial intermediaries consisting of risk taking and payment systems in spite of the existing ambiguity surrounding coordination issues between monetary and macroprudential policies it is argued that monetary policy alone is not sufficient to maintain macroeconomic and financial stability hence macroprudential policies are needed to supplement monetary in addition we find that the role of the exchange rate is critical in the implementation of monetary and macroprudential policies in emerging markets while volatile capital flows pose another challenge in so far as how the arrangement of monetary and macroprudential policies varies across countries key theoretical and policy implications have been identified

the effect of unemployment compensation on unemployment duration in germany in west germany during the 1980s law changes cut the level of unemployment compensation for the unemployed without children and extended the duration of unemployment insurance for unemployed aged over 41 analysis of these changes using the german socioeconomic panel shows that transitions from unemployment for those under 49 were particularly responsive to extensions of unemployment insurance the implied elasticity for escapes of men to employment is similar to estimates for men in the united states suggesting that differences in the potential duration of unemployment insurance only partially explain the difference in spell lengths between germany and the united states

why is poverty so high among afro brazilians a decomposition analysis of the racial poverty gap this study aimed to identify the major factors underlying the large discrepancy in poverty levels between two brazilian racial groups whites and afro brazilians we performed an oaxaca blinder type decomposition for nonlinear regressions in order to quantify the extent to which differences in observed geographic sociodemographic and labor characteristics characteristics effect account for this difference the remaining unexplained part coefficients effect provides evidence on how these characteristics differentially impact on the risk of poverty in each group a detailed decomposition of both effects allows the individual contribution of each characteristic to be determined our results show that the characteristics effect explains a large part of the discrepancy in poverty levels with education and labor variables of household members explaining at least one half of the effect and geographic and demographic variables accounting for the remainder however the unexplained part that remains significant has increased in importance in recent last years and probably results from unequal access to high quality education and the persistence of discrimination against colored workers in the labor market

financial fragility in the great moderation abstract a nascent literature explores the measurement of financial fragility this paper considers evidence for rising financial fragility during the 1984 2007 great moderation in the u s the literature suggests that macroeconomic stability combined with strong growth of credit to asset markets in asset prices and in credit relative to output are all indicators of rising financial fragility we show each of these trends in the great moderation we derive the testable implication that in the great moderation credit growth is driven more by past credit growth and less by output growth allen and gale 2000 relative to pre great moderation years results from a var model estimated on quarterly data for 1955 2007 are consistent with the hypothesis this invites a reinterpretation of the great moderation our methodology may help understand when a credit boom turns into a credit bubble and contributes to the development of methods of measuring financial fragility