A foundation model for marxian theories of the breakdown of capitalism

Marx and the writers that followed him have produced a number of theories of the breakdown of capitalism. The majority of these theories were based on the historical tendencies: the rise in the composition of capital and the share of capital and the fall in the rate of profit. However these theories were never modeled with main stream rigour. This paper presents a constant wage model, with capital, labour and land as factors of production, which reproduces the historical tendencies and so can be used as a foundation for the various theories. The use of Chaplygins theorem in the proof of the main result also gives the paper a technical interest.

Financial intermediation in a model of growth through creative destruction

This paper presents an endogenous growth model in which the research activity is financed by intermediaries that are able to reduce the incidence of researcher's moral hazard. It is shown that financial activity is growth promoting because it increases research productivity. It is also found that a subsidy to the financial sector may have larger growth effects than a direct subsidy to research. Moreover, due to the presence of moral hazard, increasing the subsidy rate to R\&D may reduce the growth rate. I show that there exists a negative relation between the financing of innovation and the process of capital accumulation. Concerning welfare, the presence of two externalities of opposite sign steaming from financial activity may cause that the no-tax equilibrium provides an inefficient level of financial services. Thus, policies oriented to balance the effects of the two externalities will be welfare improving.

A marxian model of the breakdown of capitalism

This paper sets out a Marxian model that is based on the one by Stephen Marglin with one sector and continuous substitution. It is extended by adding technical progress and land as a factor of production. It is then shown that capital accumulation causes the preconditions for the breakdown of capitalism to emerge; that is, it causes the organic composition of capital to rise, the rate of profit to fall and the rate of exploitation to rise. A compressed history of the idea of the breakdown of capitalism is then set out and an explanation is given as to how the model relates to this and how it may serve as the basis for further research.

Employment and public capital in spain

This paper analyses the e¤ects on employment of increasing the stock of public capital. To this end, we derive a wage equation so that wages are endogenized. This allows us to show that, by means of a higher elasticity of labour demand with respect to wages, a rise in public capital increases employment. The estimation of a structural model for the Spanish private sector tests and con…rms empirically this relationship. The results show that an increase in public capital has a significant and positive direct influence on employment, and indirect e¤ects derived from lower wages and higher economic growth. Finally, we undertake a simulation exercise to assess the long run efects on employment and economic growth of increasing public capital.

Spillover effects of public capital formation: evidence from the spanish regions

Maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level, the issue of the possible existence of the regional spillovers from public capital formation has received little attention. The objective of this paper is to provide evidence on the possible existence of such spillovers. We consider the case of Spain and its seventeen regions. Our methodological approach consists in estimating an aggregate VAR model for Spain as well as seventeen region-specific VAR models in which both capital installed in the region and capital installed outside the region are allowed to play a role in enhancing regional output. The estimation results can be summarized as follows. The aggregate effects of public capital formation in Spain are important. They cannot, however, be captured in their entirety by the direct effects in each region from public capital installed in the region itself. When for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results. Furthermore, the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation. Ultimately, this paper establishes the relevance of both capital installed in each region and spillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation. In doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects.

A Multisectorial model of prices: the SAM approach

Social Accounting Matrices (SAM) are normally used to analyse the income generation process. They are also useful, however, for analysing the cost transmission and price formation mechanisms. For price contributions, Roland-Holst and Sancho (1995) used the SAM structure to analyse the price and cost linkages through a representation of the interdependence between activities, households and factors. This paper is a further analysis of the cost transmission mechanisms, in which I add the capital account to the endogenous components of the Roland-Holst and Sancho approach. By doing this I reflect the responses of prices to the exogenous shocks in savings and investment. I also present an additive decomposition of the global price effects into categories of interdependence that isolates the impact on price levels of shocks in the capital account. I use a 1994 Social Accounting Matrix to make an empirical application of the Catalan economy. Keywords: social accounting matrix, cost linkages, price transmission, capital account. JEL Classification: C63, C69, D59.

Pareto-improving optimal capital and labor taxes

We show a standard model where the optimal tax reform is to cut labor taxes and leave capital taxes very high in the short and medium run. Only in the very long run would capital taxes be zero. Our model is a version of Chamley??s, with heterogeneous agents, without lump sum transfers, an upper bound on capital taxes, and a focus on Pareto improving plans. For our calibration labor taxes should be low for the first ten to twenty years, while capital taxes should be at their maximum. This policy ensures that all agents benefit from the tax reform and that capital grows quickly after when the reform begins. Therefore, the long run optimal tax mix is the opposite from the short and medium run tax mix. The initial labor tax cut is financed by deficits that lead to a positive long run level of government debt, reversing the standard prediction that government accumulates savings in models with optimal capital taxes. If labor supply is somewhat elastic benefits from tax reform are high and they can be shifted entirely to capitalists or workers by varying the length of the transition. With inelastic labor supply there is an increasing part of the equilibrium frontier, this means that the scope for benefitting the workers is limited and the total benefits from reforming taxes are much lower.

A nonlinear threshold model for the dependence of extremes of stationary sequences

One of the main implications of the efficient market hypothesis (EMH) is that expected future returns on financial assets are not predictable if investors are risk neutral. In this paper we argue that financial time series offer more information than that this hypothesis seems to supply. In particular we postulate that runs of very large returns can be predictable for small time periods. In order to prove this we propose a TAR(3,1)-GARCH(1,1) model that is able to describe two different types of extreme events: a first type generated by large uncertainty regimes where runs of extremes are not predictable and a second type where extremes come from isolated dread/joy events. This model is new in the literature in nonlinear processes. Its novelty resides on two features of the model that make it different from previous TAR methodologies. The regimes are motivated by the occurrence of extreme values and the threshold variable is defined by the shock affecting the process in the preceding period. In this way this model is able to uncover dependence and clustering of extremes in high as well as in low volatility periods. This model is tested with data from General Motors stocks prices corresponding to two crises that had a substantial impact in financial markets worldwide; the Black Monday of October 1987 and September 11th, 2001. By analyzing the periods around these crises we find evidence of statistical significance of our model and thereby of predictability of extremes for September 11th but not for Black Monday. These findings support the hypotheses of a big negative event producing runs of negative returns in the first case, and of the burst of a worldwide stock market bubble in the second example. JEL classification: C12; C15; C22; C51 Keywords and Phrases: asymmetries, crises, extreme values, hypothesis testing, leverage effect, nonlinearities, threshold models

Entrepreneurial intention, cognitive social capital and culture: empirical anaylisis for Spain and Taiwan

The main purpose of this paper is building a research model to integrate the socioeconomic concept of social capital within intentional models of new firm creation. Nevertheless, some researchers have found cultural differences between countries and regions to have an effect on economic development. Therefore, a second objective of this study is exploring whether those cultural differences affect entrepreneurial cognitions. Research design and methodology: Two samples of last year university students from Spain and Taiwan are studied through an Entrepreneurial Intention Questionnaire (EIQ). Structural equation models (Partial Least Squares) are used to test the hypotheses. The possible existence of differences between both sub-samples is also empirically explored through a multigroup analysis. Main outcomes and results: The proposed model explains 54.5% of the variance in entrepreneurial intention. Besides, there are some significant differences between both subsamples that could be attributed to cultural diversity. Conclusions: This paper has shown the relevance of cognitive social capital in shaping individuals’ entrepreneurial intentions across different countries. Furthermore, it suggests that national culture could be shaping entrepreneurial perceptions, but not cognitive social capital. Therefore, both cognitive social capital and culture (made up essentially of values and beliefs), may act together to reinforce the entrepreneurial intention.

Explaining High Economic Growth in Small Tourism Countries with a Dynamic General Equilibrium Model

This paper shows that tourism specialisation can help to explain the observed high growth rates of small countries. For this purpose, two models of growth and trade are constructed to represent the trade relations between two countries. One of the countries is large, rich, has an own source of sustained growth and produces a tradable capital good. The other is a small poor economy, which does not have an own engine of growth and produces tradable tourism services. The poor country exports tourism services to and imports capital goods from the rich economy. In one model tourism is a luxury good, while in the other the expenditure elasticity of tourism imports is unitary. Two main results are obtained. In the long run, the tourism country overcomes decreasing returns and permanently grows because its terms of trade continuously improve. Since the tourism sector is relatively less productive than the capital good sector, tourism services become relatively scarcer and hence more expensive than the capital good. Moreover, along the transition the growth rate of the tourism economy holds well above the one of the rich country for a long time. The growth rate differential between countries is particularly high when tourism is a luxury good. In this case, there is a faster increase in the tourism demand. As a result, investment of the small economy is boosted and its terms of trade highly improve.

Relationship between technological progress, capital elasticity and emissions of industrial pollutants for the production sectors in Catalonia

As is known, the Kyoto Protocol proposes to reinforce national policies for emission reduction and, furthermore, to cooperate with other contracting parties. In this context, it would be necessary to assess these emissions, both in general and specifically, by pollutants and/or among productive sectors. The object of this paper is precisely to estimate the polluting emissions of industrial origin in Catalonia in the year 2001, in a multivariate context which explicitly allows a distinction to be made between the polluter and/or the productive sector causing this emission. Six pollutants considered, four directly related to greenhouse effect. A multi-level model, with two levels, pollutants and productive sectors, was specified. Both technological progress and elasticity of capital were introduced as random effects. Hence, it has been permitted that these coefficients vary according to one or other level. The most important finding in this paper is that elasticity of capital has been estimated as very non-elastic, with a range which varies between 0.162 (the paper industry) and 0.556 (commerce). In fact, and generally speaking, the greater capital the sector has, the less elasticity of capital has been estimated. Key words: Kyoto protocol, multilevel model, technological progress

Is the Spanish Inheritance and Gift Tax incompatible with the free movement of workers and capital?: The reasoned opinion of the EU Commission IP/10/513

The aim of my speech is answering to the question if the Spanish Inheritance and Gift Tax is incompatible with the free movement of workers and capital. We are going to pay special attention to the European Commission’s request to Spain to change its Inheritance and Gift Tax provisions for Non-Residents or Assets held abroad. In order to answer to the question mentioned above five points will be explained. At first place I am going to describe the infrengement procedure established in the Article 258 that the EU Commission can follow when a Member State doesn’t comply with Community Law. At second place, we are going to explain what is the content of the EU Commission delivered on 5th of may 2010 regarding the spanish Inheritance and Gift Tax. Then, we will analise what establishes the Community Law regarding the freedom of workers and capital and how they are understood by the EU Court of Justice in similar cases. Finally, we are going to provide possible amendments that Spain could undertake.

A correlation sensitivity analysis of non-life underwriting risk in solvency capital requirement estimation

This paper analyses the impact of using different correlation assumptions between lines of business when estimating the risk-based capital reserve, the Solvency Capital Requirement (SCR), under Solvency II regulations. A case study is presented and the SCR is calculated according to the Standard Model approach. Alternatively, the requirement is then calculated using an Internal Model based on a Monte Carlo simulation of the net underwriting result at a one-year horizon, with copulas being used to model the dependence between lines of business. To address the impact of these model assumptions on the SCR we conduct a sensitivity analysis. We examine changes in the correlation matrix between lines of business and address the choice of copulas. Drawing on aggregate historical data from the Spanish non-life insurance market between 2000 and 2009, we conclude that modifications of the correlation and dependence assumptions have a significant impact on SCR estimation.

A New open economy macroeconomic model with endogenous portfolio diversification and firms entry

This paper provides a new benchmark for the analysis of the international diversi…cation puzzle in a tractable new open economy macroeconomic model. Building on Cole and Obstfeld (1991) and Heathcote and Perri (2009), this model speci…es an equilibrium model of perfect risk sharing in incomplete markets, with endogenous portfolios and number of varieties. Equity home bias may not be a puzzle but a perfectly optimal allocation for hedging risk. In contrast to previous work, the model shows that: (i) optimal international portfolio diversi…cation is driven by home bias in capital goods, independently of home bias in consumption, and by the share of income accruing to labour. The model explains reasonably well the recent patterns of portfolio allocations in developed economies; and (ii) optimal portfolio shares are independent of market dynamics.

How to use the standard model with own data?

In this work discuss the use of the standard model for the calculation of the solvency capital requirement (SCR) when the company aims to use the specific parameters of the model on the basis of the experience of its portfolio. In particular, this analysis focuses on the formula presented in the latest quantitative impact study (2010 CEIOPS) for non-life underwriting premium and reserve risk. One of the keys of the standard model for premium and reserves risk is the correlation matrix between lines of business. In this work we present how the correlation matrix between lines of business could be estimated from a quantitative perspective, as well as the possibility of using a credibility model for the estimation of the matrix of correlation between lines of business that merge qualitative and quantitative perspective.