Global trends in relative and absolute income inequality

Este documento muestra una visión general de las tendencias históricas de la desigualdad mundial de ingreso en términos absolutos y relativos -- Dependiendo del concepto usado, las tendencias de desigualdad difieren considerablemente -- La desigualdad entre países aumentó fuertemente durante el periodo 1820-2000 y ha comenzado a disminuir a principios del siglo veintiuno, independiente si es medido en términos relativos o absolutos -- La desigualdad dentro de los países, por el contrario, ha crecido especialmente fuerte en las últimas décadas: su tasa de crecimiento aceleró a partir de 1950 en términos absolutos y a partir de 1975 en términos relativos -- En términos absolutos la desigualdad global también se incrementó sustancialmente en el periodo post-1950, mientras en términos relativos la desigualdad global ha disminuido ligeramente en el mismo periodo

An agent-based approach to value theory and wealth distribution in economics

Any attempt to model an economy requires foundational assumptions about the relations between prices, values and the distribution of wealth. These assumptions exert a profound influence over the results of any model. Unfortunately, there are few areas in economics as vexed as the theory of value. I argue in this paper that the fundamental problem with past theories of value is that it is simply not possible to model the determination of value, the formation of prices and the distribution of income in a real economy with analytic mathematical models. All such attempts leave out crucial processes or make unrealistic assumptions which significantly affect the results. There have been two primary approaches to the theory of value. The first, associated with classical economists such as Ricardo and Marx were substance theories of value, which view value as a substance inherent in an object and which is conserved in exchange. For Marxists, the value of a commodity derives solely from the value of the labour power used to produce it - and therefore any profit is due to the exploitation of the workers. The labour theory of value has been discredited because of its assumption that labour was the only ‘factor’ that contributed to the creation of value, and because of its fundamentally circular argument. Neoclassical theorists argued that price was identical with value and was determined purely by the interaction of supply and demand. Value then, was completely subjective. Returns to labour (wages) and capital (profits) were determined solely by their marginal contribution to production, so that each factor received its just reward by definition. Problems with the neoclassical approach include assumptions concerning representative agents, perfect competition, perfect and costless information and contract enforcement, complete markets for credit and risk, aggregate production functions and infinite, smooth substitution between factors, distribution according to marginal products, firms always on the production possibility frontier and firms’ pricing decisions, ignoring money and credit, and perfectly rational agents with infinite computational capacity. Two critical areas include firstly, the underappreciated Sonnenschein-Mantel- Debreu results which showed that the foundational assumptions of the Walrasian general-equilibrium model imply arbitrary excess demand functions and therefore arbitrary equilibrium price sets. Secondly, in real economies, there is no equilibrium, only continuous change. Equilibrium is never reached because of constant changes in preferences and tastes; technological and organisational innovations; discoveries of new resources and new markets; inaccurate and evolving expectations of businesses, consumers, governments and speculators; changing demand for credit; the entry and exit of firms; the birth, learning, and death of citizens; changes in laws and government policies; imperfect information; generalized increasing returns to scale; random acts of impulse; weather and climate events; changes in disease patterns, and so on. The problem is not the use of mathematical modelling, but the kind of mathematical modelling used. Agent-based models (ABMs), objectoriented programming and greatly increased computer power however, are opening up a new frontier. Here a dynamic bargaining ABM is outlined as a basis for an alternative theory of value. A large but finite number of heterogeneous commodities and agents with differing degrees of market power are set in a spatial network. Returns to buyers and sellers are decided at each step in the value chain, and in each factor market, through the process of bargaining. Market power and its potential abuse against the poor and vulnerable are fundamental to how the bargaining dynamics play out. Ethics therefore lie at the very heart of economic analysis, the determination of prices and the distribution of wealth. The neoclassicals are right then that price is the enumeration of value at a particular time and place, but wrong to downplay the critical roles of bargaining, power and ethics in determining those same prices.

[Book review] Theory of Games and Economic Behaviour

Tony Mann provides a review of the book: Theory of Games and Economic Behavior, John von Neumann and Oskar Morgenstern, Princeton University Press, 1944.

Some Additional Specification Tests for Generalized Method of Moments Estimators with Macro-Economic Applications Part I : Theory

In This Paper Several Additional Gmm Specification Tests Are Studied. a First Test Is a Chow-Type Test for Structural Parameter Stability of Gmm Estimates. the Test Is Inspired by the Fact That \"Taste and Technology\" Parameters Are Uncovered. the Second Set of Specification Tests Are Var Encompassing Tests. It Is Assumed That the Dgp Has a Finite Var Representation. the Moment Restrictions Which Are Suggested by Economic Theory and Exploited in the Gmm Procedure Represent One Possible Characterization of the Dgp. the Var Is a Different But Compatible Characterization of the Same Dgp. the Idea of the Var Encompassing Tests Is to Compare Parameter Estimates of the Euler Conditions and Var Representations of the Dgp Obtained Separately with Parameter Estimates of the Euler Conditions and Var Representations Obtained Jointly. There Are Several Ways to Construct Joint Systems Which Are Discussed in the Paper. Several Applications Are Also Discussed.

Labor supply, biased technological change and economic growth

Se utiliza un modelo de innovaciones sesgadas para estudiar los efectos de cambios exógenos en la oferta laboral. En un contexto de innovaciones sesgadas, a medida que las economías acumulan capital, el trabajo se hace relativamente más escaso y más caro, por este motivo, hay incentivos para adoptar tecnologías ahorradoras de trabajo. Del mismo modo un cambio en la oferta laboral afecta la abundancia de factores y sus precios relativos. En general, una reducción de la oferta laboral, hace que el trabajo sea más caro y genera incentivos para cambio tecnológico ahorrador de trabajo. Así, el efecto inicial que tiene el cambio en la oferta laboral sobre los precios de los factores es mitigado por el cambio tecnológico. Finalmente, los movimientos en la remuneración a los factores afectan las decisiones de ahorro y, por lo tanto, la dinámica del crecimiento. En este trabajo se exploran las consecuencias de una reducción de la oferta laboral en dos contextos teóricos diferentes: un modelo de agentes homogéneos y horizonte infinito y un modelo de generaciones traslapadas.

An industrial organisation economic supply chain approach for the construction industry : a review

Understanding industries in terms of the concepts of chains, clusters and networks is becoming increasingly important in economies around the world. Supply chain management for an individual organization is an
emerging field of research in the construction management discipline, but less attention has been devoted to investigating the nature of the construction supply chains and their industrial organizational economic environment. This selected review of construction and mainstream management supply chain literature is organized around four themes; distribution, production, strategic procurement management and industrial
organization economics, and highlights the need to develop an industrial organization economic supply chain framework for construction. The merging of the supply chain concept with the industrial organization model
as a methodology for understanding firm conduct and industry structure and performance is an important contribution to both construction supply chain and construction economic theory. Much of the industrial organization supply chain literature has tended to focus upon manufacturing industries, where typically firms are permanent organizations. This raises issues as to the differences between industries founded upon temporary compared with permanent organizations. There is potential for the development of an industrial organization methodology applicable to the project based industry. Ultimately industrial organization research seeks to have direct implications for industry performance and government policies.

Liberalism, Marxism and Democratic Theory Revisited: Proposal of a Joint Index of Political and Economic Democracy

Liberalism and Marxism are two schools of thought which have left deep imprints in sociological, political and economic theory. They are usually perceived as opposite, rival approaches. In the field of democracy there is a seemingly insurmountable rift around the question of political versus economic democracy. Liberals emphasize the former, Marxists the latter. Liberals say that economic democracy is too abstract and fuzzy a concept, therefore one should concentrate on the workings of an objective political democracy. Marxists insist that political democracy without economic democracy is insufficient. The article argues that both propositions are valid and not mutually exclusive. It proposes the creation of an operational, quantifiable index of economic democracy that can be used alongside the already existing indexes of political democracy. By using these two indexes jointly, political and economic democracy can be objectively evaluated. Thus, the requirements of both camps are met and maybe a more dialogical approach to democracy can be reached in the debate between liberals and Marxists. The joint index is used to evaluate the levels of economic and political democracy in the transition countries of Eastern Europe.

A gazdaságpolitikai döntéshozatal nemzetek fölötti centralizációja és a közösségi gazdaságtan. Az adóverseny elméletének néhány tanulsága (Supranational centralization of economic policy-making and community economics: some lessons from the theory of tax competition)

Mennyiben képes jelenleg a közösségi gazdaságtan az adópolitikák nemzetek fölötti centralizációjára vonatkozó politikai döntések megalapozására? Válaszunk röviden az lesz, hogy a közösségi gazdaságtan főárama - noha számos releváns gazdasági és politikai tényező hatását sikeresen elemzi - jelenleg nem kínál kielégítőnek tekinthető döntési kritériumokat a döntéshozók számára. Ennek oka, hogy központi szerepet játszik benne egy, a modellek szempontjából exogén és a közgazdasági elmélettől idegen tényező: a kormányzatok jóindulatára, pontosabban annak mértékére vonatkozó premissza. Tanulmányunk az adóverseny fiskális föderalista elméletét vizsgálja, és megpróbál általánosabb szinten is a közszektor gazdaságelméletének jelenlegi állapotára, valamint továbbfejlesztésére vonatkozó tanulságokat levonni. A kiutat az elméleti zsákutcából a kormányzati működés és döntéshozatal, valamint a kívánatos gazdaságpolitikai döntések elméletének összekapcsolása jelentheti. Erre megtörténtek az első kísérletek, de a szisztematikus és átfogó elemzés egyelőre várat magára. / === / How far can community economics provide a basis for political decision-making on supranational centralization of taxation policies? The short answer here will be that although the mainstream of community economics succeeds in analysing many relevant economic and political factors, it fails at present to provide satisfactory criteria for decisionmakers. This is because a central role is played in it by a factor exogenous to the models and alien to economic theory: the premise of the measure of goodwill from governments. The study examines the fiscal federalist theory of tax competition. It tries to draw conclusions, on a more general level, about the present state of the economic theory of the public sector and future development of it. The way out of the theoretical blind alley could be to link the theories of government operation and decision-making and of desirable economic-policy decision-making. The first attempts to do so have been made, but a systematic and comprehensive analysis is still awaited.

Estimation of Inequality Indices of the Cumulative Distribution Function

Date of Acceptance: 02/03/2015

Estimation of Inequality Indices of the Cumulative Distribution Function

Date of Acceptance: 02/03/2015

A study on the effect of functional distribution of income on aggregate demand

In this thesis, we study the causal relationship between functional distribution of income and economic growth. In particular, we focus on some of the aspects that might alter the effect of the profit share on growth. After a brief introduction and literature review, the empirical contributions will be presented in Chapters 3,4 and 5. Chapter 3 analyses the effect of a contemporaneous decrease in the wage share among countries that are major trade partners. Falling wage share and wage moderation are a global phenomenon which are hardly opposed by governments. This is because lower wages are associated with lower export prices and, therefore, have a positive effect on net-exports. There is, however, a fallacy of composition problem: not all countries can improve their balance of payments contemporaneously. Studying the country members of the North America Free Trade Agreement, we find that the effect on export of a contemporaneous decrease in the wage share in Mexico, Canada and the United States, is negative in all countries. In other words, the competitive advantage that each country gains because of a reduction in its wage share (to which is associated a decrease in export prices), is offset by a contemporaneous increase in competitiveness in the other two countries. Moreover, we find that NAFTA is overall wage-led: the profit share has a negative effect on aggregate demand. Chapter 4 tests whether it is possible that the effect of the profit share on growth is different in the long run and in the short run. Following Blecker (2014) our hypothesis is that in the short run the growth regime is less wage-led than it is in the long run. The results of our empirical investigation support this hypothesis, at least for the United States over the period 1950-2014. The effect of wages on consumption increases more than proportionally compared to the effect of profits on consumption from the short to the long run. Moreover, consumer debt seem to have only a short-run effect on consumption indicating that in the long run, when debt has to be repaid, consumption depends more on the level of income and on how it is distributed. Regarding investment, the effect of capacity utilization is always larger than the effect of the profit share and that the difference between the two effects is higher in the long run than in the short run. This confirms the hypothesis that in the long run, unless there is an increase in demand, it is likely that firms are not going to increase investments even in the presence of high profits. In addition, the rentier share of profits – that comprises dividends and interest payments – has a long-run negative effect on investment. In the long run rentiers divert firms’ profits from investment and, therefore, it weakens the effect of profits on investment. Finally, Chapter 5 studies the possibility of structural breaks in the relationship between functional distribution of income and growth. We argue that, from the 1980s, financialization and the European exchange rate agreements weakened the positive effect of the profit share on growth in Italy. The growth regime is therefore becoming less profit-led and more wage-led. Our results confirm this hypothesis and also shed light on the concept of cooperative and conflictual regimes as defined by Bhaduri and Marglin (1990).

Holding and opportunity cost theory in a property development context

This paper focuses on the varying approaches and methodologies adopted when the calculation of holding costs is undertaken, focusing on greenfield development. Whilst acknowledging there may be some consistency in embracing first principles relating to holding cost theory, a review of the literature reveals considerable lack of uniformity in this regard. There is even less clarity in quantitative determination, especially in Australia where there has been only limited empirical analysis undertaken. Despite a growing quantum of research undertaken in relation to various elements connected with housing affordability, the matter of holding costs has not been well addressed regardless of its part in the highly prioritised Australian Government’s housing research agenda. The end result has been a modicum of qualitative commentary relating to holding costs. There have been few attempts at finer-tuned analysis that exposes a quantified level of holding cost calculated with underlying rigour. Holding costs can take many forms, but they inevitably involve the computation of “carrying costs” of an initial outlay that has yet to fully realise its ultimate yield. Although sometimes considered a “hidden” cost, it is submitted that holding costs prospectively represent a major determinate of value. If this is the case, then considered in the context of housing affordability, it is therefore potentially pervasive.

Making a match: Combining theory and evidence in policy-oriented macroeconomic modeling

A persistent question in the development of models for macroeconomic policy analysis has been the relative role of economic theory and evidence in their construction. This paper looks at some popular strategies that involve setting up a theoretical or conceptual model (CM) which is transformed to match the data and then made operational for policy analysis. A dynamic general equilibrium model is constructed that is similar to standard CMs. After calibration to UK data it is used to examine the utility of formal econometric methods in assessing the match of the CM to the data and also to evaluate some standard model-building strategies. Keywords: Policy oriented economic modeling; Model evaluation; VAR models