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The Neoclassical Theory Of Aggregate Investment And Its Criticisms, Daniele Girardi
The Neoclassical Theory Of Aggregate Investment And Its Criticisms, Daniele Girardi
Economics Department Working Paper Series
This paper surveys the neoclassical theory of aggregate investment and its criticisms. We identify four main strands in neoclassical investment theory: (i) the traditional Wicksellian model; (ii) the Fisherian ‘array-of-opportunities’ approach; (iii) the Jorgensonian model; (iv) the now prevailing adjustment cost models. We summarize each approach, discuss the main conceptual issues, and highlight similarities and differences between them. We also provide a systematic summary and discussion of the main criticisms that have been leveled at each of these models and highlight some unresolved theoretical issues.
Competition And Monopoly In The U.S. Economy: What Do Industrial Concentration Data Tell?, Leila Davis, ÖZgüR Orhangazi
Competition And Monopoly In The U.S. Economy: What Do Industrial Concentration Data Tell?, Leila Davis, ÖZgüR Orhangazi
PERI Working Papers
A recent series of academic studies, think-tank reports, and news articles shows widespread attention to rising industrial concentration and market power in the U.S. economy. In this paper, we focus on concentration in the U.S. nonfinancial corporate sector to make three contributions to this literature. First, we trace the theoretical origins of the debate on industrial concentration, and show that there is a certain degree of ambiguity surrounding the expected consequences of concentration and monopolization for nonfinancial firms. Second, we use industry- level concentration data to describe recent trends in average concentration. We show that, while concentration increases across the …
Stumbling Toward The Up Escalator: How Trends In International Trade, Investment, And Finance Have Complicated Latin America’S Quest For Sustainable, Diversified Economic Development, Mary Eliza Rebecca Ray
Stumbling Toward The Up Escalator: How Trends In International Trade, Investment, And Finance Have Complicated Latin America’S Quest For Sustainable, Diversified Economic Development, Mary Eliza Rebecca Ray
Doctoral Dissertations
This dissertation explores economic, environmental, and social aspects of Latin America and the Caribbean’s (LAC’s) halting steps away from commodity dependence (the “down escalator” envisioned by Hans Singer). It focuses on the most recent commodity boom (2003-2013), during which the region shifted back toward primary commodity production under a new policy framework aimed at limiting the environmental and social costs of this production while more broadly sharing its benefits through infrastructure, social spending, and closer oversight of foreign investors. This dissertation’s three essays focus on three international flows: trade, development finance, and investment. The first essay weighs the environmental impact …
The Role Of Intangible Assets In Explaining The Investment-Profit Puzzle, Özgür Orhangazi
The Role Of Intangible Assets In Explaining The Investment-Profit Puzzle, Özgür Orhangazi
PERI Working Papers
Starting around the early 2000s, and especially after the 2008 crisis, the rate of capital accumulation for US nonfinancial corporations has slowed down despite relatively high profitability; indicating a weakening of the link between profitability and investment. While the literature mostly focuses on financialization and globalization as the reasons behind this slowdown, I suggest adding another layer to these explanations and argue that, in conjunction with financialization and globalization, we need to pay attention to the increased use of intangible assets by nonfinancial corporations in the last two decades. Intangibles such as brand names, trademarks, patents, and copyrights play a …
Autonomous Demand And The Investment Share, Daniele Girardi, Riccardo Pariboni
Autonomous Demand And The Investment Share, Daniele Girardi, Riccardo Pariboni
Economics Department Working Paper Series
This paper looks at the effect of demand shocks on the investment share of the economy. Using panel data on 20 OECD countries, we show that the rate of growth of autonomous demand (exports, public spending and housing investment) is positively correlated with subsequent values of the share of business investment in GDP. By means of an instrumental-variables strategy, we confirm a positive effect of demand dynamics on the business investment share. We instrument autonomous demand with US demand for imports interacted with exposure to trade with the US, openness to trade of a country’s main export destinations, and military …
Three Essays On The Theory Of Environmental Regulation: Hybrid Price And Quantity Policies And Regulation In The Presence Of Co-Pollutants, Insung Son
Doctoral Dissertations
This dissertation contains three original essays in the economic theory of environmental regulation. The main motivations for this work are two problems: the design of greenhouse gas (GHG) policies when emissions of these gases interact with so-called co-pollutants and the design of hybrid price and quantity policies to deal with the uncertainty in the benefits and costs of controlling GHG emissions. Abstract Concerns about how best to control GHGs have generated intense interest in the co-benefits and adverse side-effects of climate policies. Efforts to reduce CO2 emissions can reduce emissions of flow pollutants that are emitted along with CO …
How Saving Data Is Estimated, Gokcer Ozgur
How Saving Data Is Estimated, Gokcer Ozgur
PERI Working Papers
Gross national saving is one of the widely used economic data in empirical studies, and it used in for saving-investment debate, economic growth and similar studies. However, there is a discrepancy between the general definition of saving and gross national saving data. Gross national saving does not represent a certain amount of funds, it is estimated or derived ex post. This study will focus on two different methods of the estimation of gross national saving and the methodology of these estimations. These findings show that using gross national saving cannot be used in empirical studies for saving-investment debate or similar …
Old And New Formulations Of The Neoclassical Theory Of Aggregate Investment: A Critical Review, Daniele Girardi
Old And New Formulations Of The Neoclassical Theory Of Aggregate Investment: A Critical Review, Daniele Girardi
Economics Department Working Paper Series
This paper surveys the neoclassical theory of aggregate investment and its criticisms. We distinguish four main formulations of this theory: the traditional ‘Wicksellian’ investment function; the Fisherian ‘array-of-opportunities’ approach (as Witte Jr. called it); the Jorgensonian model; the now prevailing adjustment-costs models. With respect to other papers criticizing the neoclassical theory of investment, we do not appeal to market imperfections. We instead argue that all four formulations present serious theoretical difficulties, even conceding free competition.
Sustained Investment Surges, Emiliano Libman, Juan Antonio Montecino, Arslan Razmi
Sustained Investment Surges, Emiliano Libman, Juan Antonio Montecino, Arslan Razmi
Economics Department Working Paper Series
Existing empirical studies have focused on determinants of investment. We focus instead on episodes of accelerated capital stock growth that last eight years or longer. We find that episodes are relatively common, even in low growth regions, but more so in middle income and Asian countries. After identifying 175 such episodes between 1950-2014, we employ probit analysis to explore their characteristics. Turning points in investment tend to be preceded by undervalued real exchange rates, macroeconomic stability (low inflation), and net capital outflows (especially portfolio outflows). We also find strong evidence for a negative correlation with the capital to output ratio …
Weaknesses Of 'Wage-Led Growth', Peter Skott
Weaknesses Of 'Wage-Led Growth', Peter Skott
Economics Department Working Paper Series
The emphasis in post-Keynesian macroeconomics on wage-versus profit-led growth may not have been helpful. The profit share is not an exogenous variable, and the correlations between the profit share and economic growth can be positive for some exogenous shocks but negative for others. The terminology, second, suggests a unidirectional causality from distribution to aggregate demand while in fact distribution can itself be directly affected by shifts in aggregate demand. The reduced form correlations,third, depend on interactions with the labor market, and a focus on the goods market can be misleading. If, fourth, empirical estimates are taken at face value, the …
The Financialization Of The Nonfinancial Corporation In The Post-1970 U.S. Economy, Leila Emami Davis
The Financialization Of The Nonfinancial Corporation In The Post-1970 U.S. Economy, Leila Emami Davis
Doctoral Dissertations
This dissertation analyzes the financialization of nonfinancial corporations (NFCs), emphasizing changes in firm-level financial behavior in the post-1970 U.S. economy. The dissertation consists of four essays. These essays ask what is the financialization of NFCs, explore why NFCs have ‘financialized’, and evaluate the implications for fixed investment behavior. Chapter 2 lays out a simple stylized framework describing firm-level portfolio choice and utilizes this framework to analyze the implications of increasing NFC involvement in the provision of financial services, increasingly entrenched shareholder value norms, and rising firm-level demand volatility for NFC financial structure. By articulating underlying determinants of firm-level portfolio and …
Heterodox Macro After The Crisis, Peter Skott
Heterodox Macro After The Crisis, Peter Skott
Economics Department Working Paper Series
Macroeconomics is in crisis and this creates openings for alternative perspectives. The dominant heterodox traditions, however, have shortcomings that need to be addressed, both to improve our understanding of the real world and to take advantage of the opportunities offered by the irrelevance of most mainstream macro. This paper discusses three examples of areas that need attention: (i) investment functions (where popular specifications lack behavioral and empirical support), (ii) income distribution (where key developments have received little attention) and(iii) the relation between income inequality and financial markets (where extensions of existing models may help explain financial instability)
Some Stylized Facts On The Finance-Dominated Accumulation Regime, Engelbert Stockhammer
Some Stylized Facts On The Finance-Dominated Accumulation Regime, Engelbert Stockhammer
PERI Working Papers
While there is an agreement that the Fordist accumulation regime has come to an end in the course of the 1970s, there is no agreement on how to characterize the post-Fordist regime (or if a such is already in place). The paper seeks put together various arguments related to financialization (in the broad sense) from a macroeconomic point of view and investigate the relevance of these arguments by means of an analysis stylized facts for EU countries. The paper discusses changes in investment behaviour, consumption behaviour and government expenditures, investigating to what extent changes are related to financialization. Households experience …
Financialization And Capital Accumulation In The Non-Financial Corporate Sector: A Theoretical And Empirical Investigation Of The U.S. Economy: 1973-2003, Özgür Orhangazi
Financialization And Capital Accumulation In The Non-Financial Corporate Sector: A Theoretical And Empirical Investigation Of The U.S. Economy: 1973-2003, Özgür Orhangazi
PERI Working Papers
Recent research has explored the growing ‘financialization’ process in the U.S. and other advanced economies. The term is a catch-all phrase used to denote important changes in the structure of non-financial corporations’ balance sheets, including the growth of income from financial subsidiaries and investment as well as growth in the transfer of earnings to financial markets in the forms of interest payments, dividend payments and stock buybacks. This paper seeks to empirically explore the relationship between financialization in the U.S economy and real investment at the firm level. Using data from a sample of non-financial corporations from 1973 to 2003, …