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2005

Economics

Economics Department Working Paper Series

Articles 1 - 18 of 18

Full-Text Articles in Social and Behavioral Sciences

Racism, Xenophobia, And Redistribution, Woojin Lee, John Roemer, Karine Van Der Straeten Jan 2005

Racism, Xenophobia, And Redistribution, Woojin Lee, John Roemer, Karine Van Der Straeten

Economics Department Working Paper Series

We report here a summary of our recent research on the effect that the race issue, in the United States, and the immigration issue in European countries, is having on the degree of redistribution and the size of the public sector that is implemented through political competition. We model political competition as taking place on a two dimensional policy space, where the first issue is the tax rate, or the size of the public sector, and the second issue is the race or immigration issue. Our substantive conclusion is that the conservative economic agenda has been given new life in …

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Exercises In Futility: Post-War Automobile-Trade Negotiations Between Japan And The United States, Donald W. Katzner, Mikhail J. Nikomarvo Jan 2005

Exercises In Futility: Post-War Automobile-Trade Negotiations Between Japan And The United States, Donald W. Katzner, Mikhail J. Nikomarvo

Economics Department Working Paper Series

This paper traces the history of the failed automobile-trade negotiations between Japan and the United States from the 1970’s to the mid 1990’s. It attributes the failure of those negotiations to a lack of understanding on both sides of not only what was motivating the other side, but also the unalterable cultural, social, and economic constraints under which the other side operated.

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Can Macroeconomic Policy Stimulate Private Investment In South Africa? New Insights From Aggregate And Manufacturing Sector-Level Evidence, Léonce Ndikumana Jan 2005

Can Macroeconomic Policy Stimulate Private Investment In South Africa? New Insights From Aggregate And Manufacturing Sector-Level Evidence, Léonce Ndikumana

Economics Department Working Paper Series

This study explores the determinants of investment using both aggregated industry-level data and disaggretated data on 27 sub-sectors of the manufacturing sector for the period 1970-2001. According to the results in this study, the government has potentially powerful means at its disposal to stimulate private investment. In particular, a domestic demand stimulus and public investment expansion will produce large gains in private investment. While the direct effects of lowering the interest rate appear to be quantitatively small, indirect effects operating notably through domestic demand and cheaper credit are likely to be large. The evidence in this study also indicates that …

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Distributional Conflict, The State, And Peace Building In Burundi, Léonce Ndikumana Jan 2005

Distributional Conflict, The State, And Peace Building In Burundi, Léonce Ndikumana

Economics Department Working Paper Series

This paper examines the causes of conflict in Burundi and discusses strategies for building peace. The analysis of the complex relationships between distribution and group dynamics reveals that these relationships are reciprocal, implying that distribution and group dynamics are endogenous. The nature of endogenously generated group dynamics determines the type of preferences (altruistic or exclusionist), which in turn determines the type of allocative institutions and policies that prevail in the political and economic system. While unequal distribution of resources may be socially inefficient, it nonetheless can be rational from the perspective of the ruling elite, especially because inequality perpetuates dominance. …

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Cultural Variation In The Theory Of The Firm, Donald W. Katzner Jan 2005

Cultural Variation In The Theory Of The Firm, Donald W. Katzner

Economics Department Working Paper Series

This paper presents a model of the firm that includes the possibility of firm and employee-on-the-job decision making based on alternatives to profit and utility maximization. Such alternatives are relevant and significant when explaining firm activity in cultural environments in which self interest is not considered to be a primary force driving human behavior. Three types of firms are defined and their properties compared: the Western firm, the Japanese firm, and the clan. The third is a combination of the first two.

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Keynesian Theory And The Ad-As Framework: A Reconsideration, Amitava Krishna, Peter Skott Jan 2005

Keynesian Theory And The Ad-As Framework: A Reconsideration, Amitava Krishna, Peter Skott

Economics Department Working Paper Series

Contrary to what has been argued by a number of critics, the AD-AS framework is both internally consistent and in conformity with Keynes’s own analysis. Moreover, the eclectic approach to behavioral foundations allows models in this tradition to take into account aggregation problems as well as evidence from behavioral economics. Unencumbered by the straightjacket of optimizing microfoundations, the approach can provide a useful starting point for the analysis of dynamic macroeconomic interactions. In developing this analysis, the AD-AS approach can draw on insights from the Post Keynesian, neo-Marxian and structuralist traditions, as well as from the burgeoning literature on behavioral …

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Prosperity And Stagnation In Capitalist Economics, Toichiro Asada, Peter Flaschel, Peter Skott Jan 2005

Prosperity And Stagnation In Capitalist Economics, Toichiro Asada, Peter Flaschel, Peter Skott

Economics Department Working Paper Series

The KMG growth dynamics in Chiarella and Flaschel (2000) assume that wages, prices and quantities adjust sluggishly to disequilibria in labor and goods markets. This paper modifies the KMG model by introducing Steindlian features of capital accumulation and income distribution. The resulting KMGS(teindl) model replaces the neoclassical medium- and long-run features of the originalKMG model by a Steindlian approach to capital accumulation, as developed in a paper by Flaschel and Skott (2005). The model is of dimension 4 or 5, depending on the specification of the labor supply. We prove stability assertions and show that loss of stability always occurs …

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The Effects Of Export-Oriented, Fdi-Friendly Policies On The Balance Of Payments In A Developing Economy: A General Equilibrium Investigation, Arslan Razmi Jan 2005

The Effects Of Export-Oriented, Fdi-Friendly Policies On The Balance Of Payments In A Developing Economy: A General Equilibrium Investigation, Arslan Razmi

Economics Department Working Paper Series

Many developing countries have adopted investor-friendly policies in recent years in order to attract export-oriented foreign direct investment (FDI). The effects of these policies on the external accounts have been largely ignored. This paper endogenizes FDI inflows in a structuralist general equilibrium framework to contribute towards filling this gap. Our economy consists of: (i) a non-tradable goods sector and (ii) an export processing zone (EPZ) that hosts transnational corporations. The analysis finds that, contrary to widely-shared perceptions, the short-run effects of FDI-friendly policies on the balance of payments may frequently be negative due to the nature of both the investments …

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The Role Of The State In Economic Transformation: Comparing The Transition Experiences Of Russia And China, David M. Kotz Jan 2005

The Role Of The State In Economic Transformation: Comparing The Transition Experiences Of Russia And China, David M. Kotz

Economics Department Working Paper Series

No abstract provided.

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The Contractionary Short-Run Effects Of Nominal Devaluation In Developing Countries: Some Neglected Nuances, Arslan Razmi Jan 2005

The Contractionary Short-Run Effects Of Nominal Devaluation In Developing Countries: Some Neglected Nuances, Arslan Razmi

Economics Department Working Paper Series

This paper extends the model developed by Krugman and Taylor (1978) to take into account interesting features of the evolving structure of global trade. The growing presence of transnational production chains and differential pricing behaviour of exports destined for industrial and developing countries are accommodated. Individual country and panel data pass-through estimates derived from several econometric approaches are provided to justify the latter extension. The likelihood of contractionary short-run effects of devaluations is shown to be positively related to: (1) the proportion of a country's exports destined for other developing countries, and (2) the presence of TNCs in either the …

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Wage Inequality And Overeducation In A Model With Efficiency Wages, Peter Skott Jan 2005

Wage Inequality And Overeducation In A Model With Efficiency Wages, Peter Skott

Economics Department Working Paper Series

This paper shows that the existence and persistence of ‘overeducation’ can be explained by an 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 depend inversely on aggregate economic activity. Keeping aggregate employment constant, furthermore, low-skill unemployment rises following an increase in the relative supply of high-skill labor, and relative wages may be insensitive to changes in relative labor supplies. The model may help explain rising wage inequality in some countries since the early …

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Values And Politics In The Us: An Equilibrium Analysis Of The 2004 Election, Woojin Lee, John Roemer Jan 2005

Values And Politics In The Us: An Equilibrium Analysis Of The 2004 Election, Woojin Lee, John Roemer

Economics Department Working Paper Series

The CNN exit polls after the 2004 election rated ‘moral values’ the most important issue; next came ‘jobs and the economy.’ Eighty percent of the voters who rated moral values the most important issue voted for Bush while eighty percent of the voters who rated jobs and the economy the most important voted for Kerry. We study the extent to which the distribution of voter opinion on moral values influences the positions that parties take on the economic issue, which we take to be the size of the public sector, through political competition. There are at least two distinct ways …

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Balance Of Payments Constrained Growth Model: The Case Of India, Arslan Razmi Jan 2005

Balance Of Payments Constrained Growth Model: The Case Of India, Arslan Razmi

Economics Department Working Paper Series

This study applies the Balance of Payments Constrained Growth (BPCG) model to India, a large developing country with a relatively low trade to GDP ratio. Rather than assuming similar elasticities of substitution between goods produced in different regions, the study extends the model to relax these assumptions. Johansen’s cointegration technique is employed to estimate trade parameters. Short-run adjustments are explored within a vector error correction framework. The average growth rates predicted by various forms of the BPCG hypothesis are found to be close to the actual average growth rate over the period 1950-1999, although individual decades display substantial deviations.

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Developing Country Exports Of Manufactures: Moving Up The Ladder To Escape The Fallacy Of Composition?, Arslan Razmi, Robert A. Blecker Jan 2005

Developing Country Exports Of Manufactures: Moving Up The Ladder To Escape The Fallacy Of Composition?, Arslan Razmi, Robert A. Blecker

Economics Department Working Paper Series

This paper tests for a ‘fallacy of composition’ by analysing the demand for exports of the 18 developing countries that are most specialised in manufactures in the markets of the 10 largest industrial countries. Estimated export equations (both time-series and panel data) suggest that most developing countries compete with other developing country exporters rather than with industrialised country producers. A smaller number of countries that export more high-technology products compete with industrialised country producers and also have higher expenditure elasticities for their exports. Thus, the fallacy of composition applies mainly to the larger group of countries exporting mostly low-technology products.

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Price Competition And The Fallacy Of Composition In Developing Country Exports Of Manufactures: Estimates Of Short-Run Growth Effects, Robert A. Blecker, Arslan Razmi Jan 2005

Price Competition And The Fallacy Of Composition In Developing Country Exports Of Manufactures: Estimates Of Short-Run Growth Effects, Robert A. Blecker, Arslan Razmi

Economics Department Working Paper Series

This paper studies whether intra-developing country price competition has significant effects on the short-run growth rates of developing countries that are specialized in manufactured exports. Regression estimates using the generalized method of moments (GMM) applied to annual panel data for 17 developing countries in 1983-2004 show that these countries exhibit a “fallacy of composition,” in the sense that a real depreciation relative to competing developing country exporters increases the home country’s growth rate in the short run. The results also suggest that real depreciations for these developing countries relative to the industrialized countries are contractionary.

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Power-Biased Technological Change And The Rise In Earnings Inequality, Frederick Guy, Peter Skott Jan 2005

Power-Biased Technological Change And The Rise In Earnings Inequality, Frederick Guy, Peter Skott

Economics Department Working Paper Series

New information and communication technologies, we argue, have been ‘power- biased’: they have allowed firms to monitor low-skill workers more closely, thus reducing the power of these workers. An efficiency wage model shows that ‘power-biased technical change’ in this sense may generate rising wage inequality accompanied by an increase in both the effort and unemployment of low-skill workers. The skill-biased technological change hypothesis, on the other hand, offers no explanation for the ob- served increase in effort.

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The Second Paycheck To Keep Up With The Joneses: Relative Income Concerns And Labor Market Decisions Of Married Women, Yongjin Park Jan 2005

The Second Paycheck To Keep Up With The Joneses: Relative Income Concerns And Labor Market Decisions Of Married Women, Yongjin Park

Economics Department Working Paper Series

This paper investigates whether one’s effort to keep up with the Joneses has any effect on labor supply behavior. We provide a simple model and empirical evidence that labor supply decisions of married women are influenced by relative as well as absolute income of their husbands. We find, after controlling for husbands’ absolute income and other individual characteristics, that married women are more likely to be in labor force when their husbands’ relative income is low. Results are robust across various settings and measures of relative income and the size of the effect is economically meaningful. We also show that …

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Free To Move: Migration, Tax Competition And Redistribution, Woojin Lee Jan 2005

Free To Move: Migration, Tax Competition And Redistribution, Woojin Lee

Economics Department Working Paper Series

We study a model of tax competition between two countries when both skilled and unskilled workers make their migration decisions simultaneously and wages are endogenously determined. If both factors of production are allowed to migrate freely and when the demand for skilled labor is not so elastic, the problem typically predicted in the literature of tax competition that increased mobility of production factors will pose a severe threat to redistribution possibility is less acute than it might first appear. The equilibrium tax rate can be not only positive but also increasing in the degree of mobility of unskilled workers. This …

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