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Articles 1 - 30 of 32
Full-Text Articles in Social and Behavioral Sciences
Power, Luck And Ideology In A Model Of Executive, Peter Skott
Power, Luck And Ideology In A Model Of Executive, Peter Skott
Peter Skott
The microprocessor and related technologies have transformed corporate and industry structure; applied in a neo‐liberal environment, the technologies have had profound effects on the relative power of different groups. Skott and Guy (2007) and Guy and Skott (2008) formalized one aspect of this process of power‐biased technical change: firms' increased ability to monitor low‐paid employees and the resulting changes in inequality and employment at the low end of the income distribution. This paper addresses power biases and income inequality at the high end. Increasing firm‐level financial volatility has intensified the agency problem and increased the power of corporate executives. These …
Real Exchange Rates And The Long‐Run Effects Of Aggregate Demand In Economies With Underemployment, Peter Skott, Martin Rapetti, Arslan Razmi
Real Exchange Rates And The Long‐Run Effects Of Aggregate Demand In Economies With Underemployment, Peter Skott, Martin Rapetti, Arslan Razmi
Peter Skott
Successful economic development to a large extent derives from the mobilization of underemployed resources. Demand policy can play an important role. It is critical, however, to consider balance of payments constraints and to ensure an expansion of investment in the modern sector. A combination of investment promotion and exchange rate intervention may be required to achieve these goals.
Pluralism, The Lucas Critique, And The Integration Of Macro And Micro, Peter Skott
Pluralism, The Lucas Critique, And The Integration Of Macro And Micro, Peter Skott
Peter Skott
Mainstream macroeconomics has pursued micro founded models based on the explicit optimization by representative agents. The result has been a long and wasteful detour. But elements of the Lucas critique are rele- vant, also for heterodox economists.
The Real Exchange Rate And Economic Development, Arslan Razmi, Martin Rapetti, Peter Skott
The Real Exchange Rate And Economic Development, Arslan Razmi, Martin Rapetti, Peter Skott
Peter Skott
Recent empirical studies have found a robust correlation between competitive exchange rates and economic growth in developing economies. This paper presents (i) a formal model to help explain these findings and (ii) econometric evidence on the relation between investment and the real exchange rate. The model emphasizes the existence of (hidden) unemployment as a source of endogenous growth, even under constant returns to scale. Growth promoting policies, however, affect the external balance, and two instruments are needed in order to achieve targets for both the growth rate and the trade balance. The real exchange rate can serve as one of …
The Real Exchange Rate And Economic Growth: Are Developing Countries Different?, Peter Skott, Martin Rapetti, Arslan Razmi
The Real Exchange Rate And Economic Growth: Are Developing Countries Different?, Peter Skott, Martin Rapetti, Arslan Razmi
Peter Skott
Recent research has found a positive relationship between real exchange rate (RER) undervaluation and economic growth. Different rationales for this association have been offered, but they all imply that the mechanisms involved should be stronger in developing countries. Rodrik (2008) explicitly analyzed and found evidence that the RER-growth relationship is more prevalent in developing countries. We show that his finding is very sensitive to the criterion used to divide the sample between developed and developing countries. We then use alternative classification criteria and empirical strategies to evaluate the existence of asymmetries between groups of countries and find that the effect …
Public Debt In An Olg Model With Imperfect Competition, Peter Skott, Soon Ryoo
Public Debt In An Olg Model With Imperfect Competition, Peter Skott, Soon Ryoo
Peter Skott
Fiscal policy is needed to avoid dynamic inefficiency and maintain full employment in a modified Diamond OLG model with imperfect competition. A distributionally neutral tax scheme can maintain full employment in the face of variations in .household confidence.. No variations in taxes will be needed if households correctly anticipate future taxes: the tax policy functions as an insurance scheme. JEL Categories: E62, E22
Positional Goods, Climate Change And The Social Returns To Investment, Peter Skott, Leila Davis
Positional Goods, Climate Change And The Social Returns To Investment, Peter Skott, Leila Davis
Peter Skott
The economic analysis of global warming is dominated by models based on optimal growth theory. This approach can generate biases in the presence of positional goods and status effects. We show that by ignoring these direct consumption externalities, integrated assessment models overestimate the social return to conventional investment and underestimate the optimal amount of investment in mitigation. Empirical evidence on the influence of relative consumption on utility suggests that the bias could be quantitatively significant. Our results from a simple survey support this conclusion. JEL Categories: Q13, I3, E1
Heterodox Macro After The Crisis, Peter Skott
Heterodox Macro After The Crisis, Peter Skott
Peter Skott
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) JEL Categories: E12, …
Increasing Inequality And Financial Instability, Peter Skott
Increasing Inequality And Financial Instability, Peter Skott
Peter Skott
Rising inequality affects the composition of asset demands as well as aggregate demand. The poor have few financial assets and their portfolio is skewed towards fixed-income assets. The rich, by contrast, hold a large proportion of their wealth in stocks. Thus, an increase in inequality tends to raise the demand for stocks. This generates capital gains, and these gains can fuel a bubble, as desired portfolios shift further towards stocks. JEL Categories: E11, E21
Business Cycles, Peter Skott
Business Cycles, Peter Skott
Peter Skott
This note outlines and discusses some of the strands in the post-Keynesian literature on business cycles. Most post-Keynesians have focused on endogenously generated cycles, but the mechanism varies: some focus on the goods market, others on financial markets, the labor market, or political intervention. The merits of formal modeling of the cycles have also come in for debate. JEL Categories:
Distributional Biases In The Analysis Of Climate Change, Peter Skott, Leila Davis
Distributional Biases In The Analysis Of Climate Change, Peter Skott, Leila Davis
Peter Skott
The economic analysis of global warming is dominated by models based on optimal growth theory. These representative-agent models have an intrinsic distributional bias in favor of the rich. The bias is compounded by the se of revenue-neutrality in the allocation of emission permits. The result is mitigation recommendations that are biased downwards. JEL Categories: Q13, I3, E1
Public Debt And Full Employment In A Stock-Flow Consistent Model Of A Corporate Economy, Peter Skott, Soon Ryoo
Public Debt And Full Employment In A Stock-Flow Consistent Model Of A Corporate Economy, Peter Skott, Soon Ryoo
Peter Skott
This paper examines the fiscal requirements for continuous full employment. We find that (i) changes in the financial behavior of households and firms require adjustments in tax rates and public debt, (ii) the stability of the steady-state solution for public debt depends on the .fiscal instrument and the household consumption function, (iii) in stable cases, a fall in government consumption (or a decline in another component of autonomous demand) requires an increase in the steady-state ratio of public debt to capital, and (iv) the steady-state tax rate may be positively or negatively related to the level of debt. JEL Categories: …
An Empirical Evaluation Of Three Post Keynesian Models, Peter Skott, Ben Zipperer
An Empirical Evaluation Of Three Post Keynesian Models, Peter Skott, Ben Zipperer
Peter Skott
Structuralist and post Keynesian models differ in their assumptions about firms’ investment behavior and pricing/output decisions. This paper compares three benchmark models: Kaleckian, Robinsonian and Kaldorian. We analyze the implications of these models for the steady growth path and the cyclical properties of the economy, and evaluate the consistency of the theoretical predictions with empirical evidence for the US. Our regression results and the stylized cyclical pattern of key variables are consistent with the Kaldorian model. The Kaleckian investment function and the Robinsonian pricing behavior find no support in the data.
The Great Detour, Peter Skott
The Great Detour, Peter Skott
Peter Skott
This note comments on the state of macroeconomics, arguing that the ‘micro founded’ macro that developed after 1970s has been a wasteful detour. The paper will appear in a symposium in Homo Oeconomicus, vol. 27 (2), 2010, on the crisis and the response from the British Academy to the questions from the British Queen. JEL Categories: E1, B41
Labor Heterogeneity, Inequality And Institutional Change, Peter Skott
Labor Heterogeneity, Inequality And Institutional Change, Peter Skott
Peter Skott
US earnings inequality has increased dramatically since the 1970s, and the prospect of a reversal depends on what caused the trend. The standard explanation emphasizes skill-biased technical change. This paper briefly considers some aggregation issues and then proceeds to outline two alternative perspectives .power biased technical change and the effects of induced mismatch in the labor market .and their implications. JEL Categories: J31, J41, O33
Financialization In Kaleckian Economies With And Without Labor Constraints, Peter Skott, Soon Ryoo
Financialization In Kaleckian Economies With And Without Labor Constraints, Peter Skott, Soon Ryoo
Peter Skott
No abstract provided.
Macroeconomic Implications Of Financialization, Peter Skott, Soon Ryoo
Macroeconomic Implications Of Financialization, Peter Skott, Soon Ryoo
Peter Skott
A growing literature suggests that 'financialization' may weaken the performance of non-financial corporations and constrain the growth of ag- gregate demand. This paper evaluates (some of) the claims that have been made using two alternative approaches (one derived from Skott (1981, 1988, 1989) and one from Lavoie and Godley (2001-2002)) and two differ- ent settings (a labor-constrained setting and a dual-economy setting). All models pay explicit attention to financial stock-flow relations. The results are insensitive to the precise specification of household saving behavior but depend critically on the labor market assumptions (labor-constrained vs dual) and the specification of the investment …
Japanese Growth And Stagnation: A Keynesian Perspective, Peter Skott, Takeshi Nakatani
Japanese Growth And Stagnation: A Keynesian Perspective, Peter Skott, Takeshi Nakatani
Peter Skott
This paper uses a modified Harrodian model to understand both the long period of rapid Japanese growth and the recent period of stagnation. The model has multiple steady-growth solutions when the labour supply is highly elastic, and government intervention, we argue, took the Japanese economy onto a high-growth trajectory. Labour constraints began to ap- pear around 1970, and a combination of high saving rates and slow popu- lation growth account for the stagnation of the 1990s. This combination produces a structural liquidity trap and threatens the sustainability of at- tempts to ensure near full employment through fiscal policy or by …
Wage Inequality And Skill Asymmetries, Peter Skott, Paul Auerbach
Wage Inequality And Skill Asymmetries, Peter Skott, Paul Auerbach
Peter Skott
Using a simple model with two levels of skill, we assume that high skill workers who fail to get high skill jobs may accept low skill positions; low skill workers do not have the analogous option of filling high skill position. This asymmetry implies that an adverse, skill neutral shock to aggregate employment may cause an increase in wage inequality, both between and within skill categories, as well as an increase in unemployment, especially among low skill workers. Movements in productivity, unemployment and inequality may thus be linked to induced overeducation and credentialism.
Distributional Consequences Of Neutral Shocks To Economic Activity In A Model With Efficiency Wages And Overeducation, Peter Skott
Distributional Consequences Of Neutral Shocks To Economic Activity In A Model With Efficiency Wages And Overeducation, Peter Skott
Peter Skott
This paper shows that the existence and persistence of `overeducation' can be explained by a simple extension of the efficiency wage model. When calibrated to fit the amounts of overeducation found in most empirical studies, the model implies that both the relative wage and the relative employment rate of high-skill workers will depend inversely on the aggregate level of activity. The model may help explain the patterns of rising wage inequality that have been observed in many countries since the early 1970s.
The Importance Of Setting The Agenda, Peter Skott, Manfred Holler
The Importance Of Setting The Agenda, Peter Skott, Manfred Holler
Peter Skott
Framing effects and bounded rationality imply that election campaigns may be an important determinant of election outcomes. This paper uses a two-party setting and simple game theoretic models to analyse the strategic interaction between the parties' campaign decisions. Alternations of power emerge naturally, even if both electoral preferences and party positions remain constant
Economic Explanation, Ordinality And The Adequacy Of Analytic Specification, Peter Skott, Donald Katzner
Economic Explanation, Ordinality And The Adequacy Of Analytic Specification, Peter Skott, Donald Katzner
Peter Skott
This paper examines the implicit links between models containing ordinal variables and their underlying unquantified counterparts that are necessary to make the former viable theoretical constructions. It is argued that when the underlying unquantified structure is unknown, the permissible transformations of scale applicable to the ordinal variables have to be restricted beyond that which is permitted by dint of the ordinality itself. The possibility of an underlying structure being known but unspecified is also considered. In the case of the efficiency wage model, the only usable transformations of the ordinal effort scale are those which are multiples of each other.
Demand Policy In The Long Run, Peter Skott, Rajiv Sethi
Demand Policy In The Long Run, Peter Skott, Rajiv Sethi
Peter Skott
This paper analyses the use of aggregate demand policies to ensure full- employment growth in the long run. The results support Victoria Chick's warning in Macroeconomics after Keynes against the misapplication of short-run Keynesian policy prescriptions to long-run problems.
Wage Formation And The (Non-)Existence Of The Nairu, Peter Skott
Wage Formation And The (Non-)Existence Of The Nairu, Peter Skott
Peter Skott
The influence of NAIRU theory on economic policy is both puzzling and unfortunate, especially in a European context. This paper shows that standard rationality assumptions and objective functions may fail to generate a well-defined NAIRU in a unionized economy. It then presents two simple models with endogenous wage aspirations. One version of the model produces a unique long-run NAIRU while the other implies the presence of aspiration-induced hysteresis in the employment rate. The hysteretic version seems preferable on theoretical grounds and - at a stylized level - this version also fits the empirical evidence better than the non-hysteretic version. The …
Stagflationary Consequences Of Prudent Monetary Policy In A Unionized Economy, Peter Skott
Stagflationary Consequences Of Prudent Monetary Policy In A Unionized Economy, Peter Skott
Peter Skott
Stylised models of the policy game between monetary policy makers and the private sector have suggested that discretionary policy regimes suffer from an inherent inflationary bias and that pre-commitment to a target rate of inflation may be desirable. This paper shows that in the presence of labour unions, the monetary policy game can lead to radically different results: a central bank that is completely indifferent to the level of inflation may obtain outcomes with high employment rates and zero inflation while 'prudent', inflation-averse, central banks generate stagflation with positive inflation and low rates of employment
Skill Asymmetries, Increasing Wage Inequality And Unemployment, Peter Skott, Gunnar Thorlund Jepsen
Skill Asymmetries, Increasing Wage Inequality And Unemployment, Peter Skott, Gunnar Thorlund Jepsen
Peter Skott
Using a simple model with two levels of skill, we assume that high-skill workers who fail to get high-skill jobs may accept low-skill positions; low-skill workers do not have the analogous option of filling high-skill positions. This asymmetry implies that a slowdown in Hicks-neutral technical change (or other adverse, skill-neutral shocks) may cause an increase in wage inequality, both between and within skill categories, as well as an increase in unemployment, especially among low-skill workers. Movements in productivity, unemployment and inequality may thus be linked to induced overeducation and credentialism.
On The Effects Of Drug Policy, Gunnar Thorlund Jepsen, Peter Skott
On The Effects Of Drug Policy, Gunnar Thorlund Jepsen, Peter Skott
Peter Skott
This paper presents a simple analytical model of the market for hard drugs. The key assumptions are (i) a distinction between new users and existing addicts, (ii) imperfect competition, (iii) selective marketing efforts towards potential users, and (iv) the existence of policy effects on consumer loyalty as well as on the static price elasticity of demand facing individual suppliers at any given moment. It is shown that the long-run effects of stricter enforcement may be an increase in both the number of addicts and total consumption.
Uneven Development And The Dynamics Of Distortion, Peter Skott, Rajiv Sethi
Uneven Development And The Dynamics Of Distortion, Peter Skott, Rajiv Sethi
Peter Skott
This paper develops a two-country, two-sector model of international trade with increasing returns to scale in one sector. Free trade leads to asymmetric equilibria even when both countries are identical with respect to technology, tastes and factor endowments. For some parameter values, trade leads to a uniform welfare improvement in both countries, while for others it can give rise to uneven development in the sense of persistent disparities in wages, income and welfare. In the latter case, distortionary industrial policy by the less developed country may be welfare enhancing. If the dynamics of policy changes are endogenized, the model gives …
Clower On Effective Demand, Peter Skott, Amitava Krishna Dutt
Clower On Effective Demand, Peter Skott, Amitava Krishna Dutt
Peter Skott
This note examine's Clower's recent criticisms of Keynes' theory of effective demand and argues that Keynes added much to Marshallian theory when he extended to the aggregate level, that his theory does have implications for unemployment without requiring wage rigidity, that his theory does not depend on the non-clearance of the good market, and the main difference between Keynes and the Keynesians concerns the consequences of wage-price flexibility.
The Crisis Of Egalitarian Policy And The Promises Of Asset-Based Redistribution, Peter Skott
The Crisis Of Egalitarian Policy And The Promises Of Asset-Based Redistribution, Peter Skott
Peter Skott
This paper analyses the links between egalitarian policy and unemployment and the possible use of asset-based redistribution to overcome the crisis of egalitarian policy. Contrary to left- Keynesian belief, egalitarian policies in the postwar period were not the means to ensure high aggregate demand and full employment. The main direction of causation went the other way: full employment generated increasing egalitarian demands while high unemployment after the golden age paved the way for increasing inequality. The breakdown of the golden ages is itself explained by a gradual deterioration of the business climate which undermined the full employment policy. In addition, …