Publications
Search by
1657 publications found
-
Working Paper No.302
01 June 2000
Kaleckian Models of Growth in a Stock-flow Monetary Framework
AbstractThis paper presents a simple growth model grounded in a stock-flow monetary accounting framework. The framework ensures that all stocks and all flows are accounted for and that the real and financial sides of the economy are coherent with one another. Credit, money, equities and stocks of real capital link periods of time with one another in articulated sequences. Wealth is allocated between assets on Tobinesque principles but no equilibrium condition is necessary to bring the “demand” for money into equivalence with its “supply.” Growth and profit rates, as well as valuation, debt and capacity utilization ratios are analysed using simulations in which a growing economy is assumed to be shocked by changes in interest rates, liquidity preference, real wages, and the parameters which determine how firms finance investment.
Download Working Paper No. 302 PDF (1,011.11 KB) -
Policy Notes No.5
01 May 2000
Can the Expansion Be Sustained?
AbstractHyman P. Minsky’s insights into the relationship between profits, economic growth, and the public and private financial balances are particularly relevant to today’s conditions. How can a Minskyan view be applied to explain the processes that brought the economy to its current state and to recommend a policy stance for the future?
Download Policy Note 2000/5 PDF (204.78 KB) -
Working Paper No.301
01 May 2000
Trends in Direct Measures of Job Skill Requirements
AbstractIt is commonly assumed that jobs in the United Sates require ever greater levels of skill and, more strongly, that this trend is accelerating as a result of the diffusion of information technology. This has led to substantial concern over the possibility of a growing mismatch between the skills workers possess and the skills employers demand, reflected in debates over the need for education reform and the causes of the growth in earnings inequality. However, efforts to measure trends have been hampered by the lack of direct measures of job skill requirements. This paper uses previously unexamined measures from the quality of Employment Surveys and the Panel Study of Income Dynamics to examine trends in job education and training requirements and provide a validation tool for skill measures in the Dictionary of Occupational Titles, whose quality has long been subject to question. Results indicate that job skill requirements have increased steadily from the 1970s through the 1990s but that there has been no acceleration in recent years that might explain the growth in earnings inequality. There has also been no dramatic change in the number of workers who are undereducated. These results reinforce the conclusions of earlier work that reports of a growing skills mismatch are likely overdrawn.
Download Working Paper No. 301 PDF (581.93 KB) -
Working Paper No.300
01 May 2000
Recent Trends in Wealth Ownership, 1983–1998
AbstractUsing data from the Survey of Consumer Finances, I find that wealth inequality continued to rise in the United States after 1989, though at a reduced rate. The share of the wealthiest 1 percent of households rose by 3.6 percentage points from 1983 to 1989 and by another 0.7 percentage points from 1989 to 1998. Between 1983 and 1998, 53 percent of the total growth in net worth accrued to the top 1 percent of households and 91 percent to the top 20 percent. Another disturbing trend is that median net worth (in constant dollars), after growing by 7 percent from 1983 to 1989, increased by only another 4 percent by 1998. Indeed, the average wealth of the poorest 40 percent fell by 76 percent between 1983 and 1998 and by 1998 was only $1,100. Moreover, the financial resources accumulated by families in the bottom three income quintiles were very meager and dwindled between 1989 and 1998. The new figures also point to the growing indebtedness of the American family, with the overall debt-equity ratio climbing from 0.151 in 1983 to 0.176 in 1998. The ownership of investment assets was still highly concentrated in the hands of the rich in 1998. About 90 percent of the total value of stocks, bonds, trusts, and business equity were held by the top 10 percent. Despite the widening ownership of stock (48 percent of households owned stock shares either directly or indirectly in 1998), the richest 10 percent still accounted for 78 percent of their total value. With regard to racial and ethnic differences, the results show that over the period 1983 to 1998 non-Hispanic African American households made some gains relative to whites in median net worth and home ownership but remained the same in terms of mean net worth. Hispanic households made significant gains on non-Hispanic white households in terms of mean net worth and home ownership but not in terms of median wealth.
Download Working Paper No. 300 PDF (155.78 KB) -
Policy Notes No.4
01 April 2000
Health Care Finance in Need of Rethinking
AbstractHospitals have been squeezed by the Balanced Budget Act; the uninsured population is still on the rise; and long-term care is paid for largely by welfare grants. The nation’s flawed structure of health care finance ultimately will adversely affect the quality of care for all.
Download Policy Note 2000/4 PDF (47.57 KB) -
Working Paper No.299
01 March 2000
The Public Commodities Problem
AbstractThe decision about how much to spend on a public program depends on the answers to two questions: Should the government pursue the goal of this program? Given that the program’s goal should be adopted, what is the optimal level of spending to achieve it? If the answer to the first question is yes, it might seem desirable to set spending at the optimal level to achieve the goal. However, spending is often not set at that level, and there is likely to be an underfunding bias. This paper uses the median voter theorem to demonstrate that the level that is approved does not depend solely on the amount supporters think is necessary. Opponents of the program’s goal and supporters of the goal who favor relatively less spending than other supporters favor may form a coalition that ensures that the level of spending approved will be lower than the level most supporters think is optimal. The more opponents there are and the more disagreement there is among supporters about the optimal level, the greater the difference between the actual level of spending and the amount the typical supporter believes is optimal
Download Working Paper No. 299 PDF (225.90 KB) -
Working Paper No.298
01 March 2000
Krugman on the Liquidity Trap
AbstractPaul Krugman has argued that Japan is in a liquidity trap and that it can recover only if the central bank there follows a policy of “credible inflation.” This paper argues that Krugman’s proposal, which is similar to what Fisher proposed during the Depression, is based on a different interpretation of the liquidity trap from that proposed by Keynes. As a result, his policy recommendations can result in neither the elimination of the trap nor in Japan’s economic recovery.
Download Working Paper No. 298 PDF (35.45 KB) -
Working Paper No.297
01 March 2000
What’s Behind the Recent Rise in Profitability?
AbstractProfitability in the United States has been rising since the early 1980s and by 1997 was at its highest level since its postwar peak in the mid 1960s, and the profit share, by one definition, was at its highest point. In this paper I examine the role of the change in the profit share and capital intensity, as well as structural change, on movements in the rate of profit between 1947 and 1997. Its recent recovery is traced to a rise in the profit share in national income, a slowdown in capital-labor growth on the industry level, and employment shifts to relatively labor-intensive industries.
Download Working Paper No. 297 PDF (366.51 KB) -
Working Paper No.296
01 March 2000
An Alternative Stability Pact for the European Union
AbstractThis paper proposes an alternative stability and growth pact among European Union (EU) governments that would underpin the introduction of a single currency and a “single market” within the EU. The alternative pact embraces a number of new aspects of integration within the EU that are based on a different monetary analysis (different from that of “new monetarism”), new objectives for economic policy (such as employment and growth), and new institutions to reduce various kinds of disparities across the EU. The paper begins by critically examining the Stability and Growth Pact, which accompanied the introduction of the euro in January 1999, but which has not received as much attention in the policy debates on the euro as some other aspects of it. This is followed by a discussion of the institutional underpinnings of the euro, with the argument made that the institutional arrangements have a number of weaknesses. An alternative pact governing monetary and fiscal policy, which contains the promotion of the objective of full employment and that requires the creation of new institutions, is proposed.
Download Working Paper No. 296 PDF (47.78 KB) -
Policy Notes No.3
01 March 2000
Welfare College Students
AbstractThe rules and regulations that were developed to reduce welfare rolls through immediate employment discourage the achievement of economic independence through the pursuit of higher education.
Download Policy Note 2000/3 PDF (86.51 KB) -
Policy Notes No.2
05 February 2000
Is the New Economy Rewriting the Rules?
AbstractFull employment without inflation can continue—with the right leadership, prudent policy changes to manage the dangers, and cooperation from all branches of the government.
Download Policy Note 2000/2 PDF (64.39 KB) -
Public Policy Brief No.59
03 February 2000
Financing Long-Term Care
AbstractThe nation is not prepared to deal with the jump in expenditures for long-term care that will come with the aging of the baby-boom generation. Only a small part of that care is paid for privately (out-of-pocket or through private insurance). Most is financed through Medicaid, the program that is intended to ensure medical care for the indigent. This use of Medicaid comes at a high cost for individuals and society: the allotment of more than a third of the Medicaid budget to long-term care; a two-tier care system; and the commandeering of limited funds by middle- and high-income people through elaborate estate planning to circumvent eligibility requirements. These problems would be mitigated by replacing the welfare model with an insurance model—voluntary or compulsory private insurance, with subsidies through income-scaled tax credits to ensure affordability. An equitable and efficient system could be created with a blend of public money, private insurance, and other private saving, with a safety net for those in greatest need.
Download Public Policy Brief No. 59, 2000 PDF (141.21 KB) -
Working Paper No.295
01 February 2000
Is There a Skills Crisis?
AbstractMany economists and other social scientists and policy makers believe that the growth in inequality in the last two decades reflects mostly an imbalance between the demand for and the supply of employee skills driven by technological change, particularly the spread of computers. However, the empirical basis for this belief is not strong. The growth in inequality was concentrated in the recession years of the early 1980s and any imbalance between the supply of and demand for workers with technological skills likely did not occur until later. The growth of the supply of more-educated workers decelerated during the 1980s, but any impact of that likely would not have been felt until the late 1980s and 1990s. However, inequality actually stabilized during this latter period. On the demand side, trends in occupational composition do not suggest that upgrading was particularly rapid in the 1980s and 1990s compared to the 1970s. Computers do not seem to have greatly affected employment in a number of narrow occupations that are likely to be sensitive to technological change (e.g., computer programmers, bank tellers). Computer use itself does seem to be associated with more education, even controlling for occupation, but the causal status of this relationship is uncertain and even the magnitude of the observed association does not seem large enough to have seriously compromised the ability of supply to meet the implied growth in demand. By contrast, the recession of the early 1980s coincides with a dramatic decline of traditionally better paid blue collar workers, particularly in manufacturing. This suggests a need for a closer look at other possible causes of inequality growth, such as macroeconomic forces and the decline of institutional protections for workers.
Download Working Paper No. 295 PDF (528.63 KB) -
Working Paper No.294
01 February 2000
The Brazilian Crisis
AbstractThis paper argues that the Brazilian crisis differs from the standard Minsky crisis in that it is Brazil’s government that is engaging in Ponzi financing while private sector balance sheets are relatively robust. However, attempts to stabilize the economy through high interest rates and expenditure cuts may quickly produce private sector fragility. This is the dilemma faced by Brazilian economic policy today.
Download Working Paper No. 294 PDF (36.33 KB) -
Strategic Analysis
01 January 2000
Interim Report
AbstractIf the United States’ balance of trade does not improve, the country could eventually find itself in a “debt trap,” the author says. The aim of this paper, the second in a series offering Godley’s strategic analysis, is to display what seems reasonably likely to happen if world output recovers but otherwise past trends, policies, and relationships continue. The potential usefulness of the exercise is to warn policymakers of dangers that may exist and to help them think out what policy instruments are, or should be made, available to deal with worst cases, should they arise.
Download Strategic Analysis, January 2000 PDF (346.89 KB) -
Policy Notes No.1
01 January 2000
Explaining the US Trade Deficit
AbstractConventional theory makes the curious assumption that, in international trade, movements in the real exchange rate negate cost differences so as to make all countries equally competitive. But quite the contrary, it is absolute cost advantages that determine competition between countries, just as they determine the relative price of two sets of goods within one country.
Download Policy Note 2000/1 PDF (93.38 KB) -
Public Policy Brief No.58
10 December 1999
A New Approach to Tax-Exempt Bonds
AbstractThe current system of tax-exempt bond financing is inefficient and inequitable because a large portion of the federal subsidy provided by the tax exemption does not reach state and local governments and accrues instead to the wealthiest investors. In addition, the current system excludes large institutional investors, both domestic and foreign, with their huge pools of capital, and it lacks the stable oversight characteristic of the taxable bond market. Edward V. Regan and his associates have developed a new security concept to overcome these weaknesses. The American global infrastructure security (AGIS) bond has two components that are sold separately—tax exemption and income flow—creating a taxable bond for sale in the regular capital markets in addition to the tax exclusion benefit.
Download Public Policy Brief No. 58, 1999 PDF (137.88 KB) -
Public Policy Brief No.57
09 December 1999
Do Institutions Affect the Wage Structure?
AbstractUnion strength is capable of boosting wages for workers at the low end of the income scale. Even when differences in education and industry type are accounted for, workers in right-to-work states have a greater probability of earning close to the minimum wage than workers in states with relatively high union density. The decline of unionization requires that other labor market institutions, mainly the minimum wage, be used to improve the distribution of income in order to combat the continuing growth of inequality in the United States.
Download Public Policy Brief No. 57, 1999 PDF (140.34 KB) -
Book Series
01 December 1999
Modernizing Financial Systems
AbstractSince the 1980s many changes have taken place in the financial system in the United States and to some extent in other countries—uniform capital requirements have been instituted, regulations have been eased, and market share consolidation of firms in the financial services business has been allowed. But more substantive reforms are necessary to avert crises such as those that occurred in Japan, Korea, and other Asian countries.
Financial and technological innovations have brought new dimensions of credit risk, requiring sophisticated skills of bank manager and regulator alike. The modernization of the financial system must reflect the changing and competitive nature of the market and be framed in a regulatory and supervisory environment that, first, ensures the safety of the payment system and, second, offers incentives for prudent risk taking and sound portfolio investments. This book offers a number of policy avenues that merit serious consideration.
-
Working Paper No.293
01 December 1999
Employment Inequalities
AbstractThis paper documents the employment disadvantage faced by the less qualified part of the labor force and examines the factors that influence the differing extent of this disadvantage across OECD countries. We argue that employment rates for quartiles of the population ranked by educational qualification provide the best measure of employment disadvantage. We show that differences in these employment rates for the most- and least-educated quartiles vary substantially within Europe, but are not on average higher than those in the USA. The least qualified suffer the greatest employment disadvantage in countries in which the overall employment rates are low and, for men, the literacy test scores for the least qualified are relatively low. A high level of imports from the South appears to be associated with greater employment disadvantage, but there is no discernible tendency for a high level of wage dispersion, low benefits, or weak employment protection legislation to be associated with greater employment disadvantage. Labor market flexibility has not been the route by which some OECD countries have managed to minimize the employment disadvantage of the least qualified.
Download Working Paper No. 293 PDF (201.04 KB) -
Working Paper No.292
01 December 1999
Why Do Political Action Committees Give Money to Candidates?
AbstractThis paper examines political action committees’ motivations for giving campaign contributions to candidates for political office. First, the paper estimates the effect of campaign contributions received by candidates on the outcomes of the 1996 elections to the United States House of Representatives. Next, the paper uses a Congressional Quarterly survey of candidates’ policy positions to determine the impact of contributions on the policy stances adopted by the candidates. The empirical results suggest that political action committees donate campaign funds to challengers in order to affect the outcome of the election. Campaign contributions received by challengers have a large impact on the election outcome but do not affect the challengers’ policy stances on any of the five issues examined in this paper. Campaign contributions to incumbents do not raise their chances of election, however, and affect their policy decisions on only one issue. Some evidence is presented that PAC contributions to incumbents may be given primarily in order to secure unobservable services for the political action committees.
Download Working Paper No. 292 PDF (100.70 KB) -
Working Paper No.291
01 December 1999
The Social Wage, Welfare Policy, and the Phases of Capital Accumulation
AbstractThis paper addresses two broad questions. The first one relates to the economic rationale for the existence of the welfare state. To address this question, we review the marginalist arguments and then counterpose a historical and institutional analysis of the rise of the US welfare state. The second question concerns the macroeconomic impacts of welfare spending. We examine the standard neoclassical macroeconomic arguments for and against welfare cutbacks and then propose an alternative growth framework, rooted in the classical and Harrodian traditions, to evaluate social policy. We argue that the alternative framework provides both demand-side and supply-side mechanisms whereby social spending can be supported without harmful long-run macroeconomic effects. Our analysis suggests that, in general, because growth and crises are endogenous, there may be no tension between social policy and economic performance. Specifically, the recent cutbacks in the US are hard to justify on purely economic grounds.
Download Working Paper No. 291 PDF (401.78 KB) -
Working Paper No.290
01 December 1999
Finance in a Classical and Harrodian Cyclical Growth Model
AbstractThis paper is an extension of an earlier working paper (“Finance and the Macroeconomic Process in a Classical Growth and Cycles Model,” Working Paper No. 253). The basic structure of the model remains unchanged in that it is based on a social accounting matrix (SAM) with endogenous money. Investment in circulating capital adds to output and investment in fixed capital adds to potential output. Driving the model’s fast adjustment process, which describes the disequilibrium adjustment between aggregate demand and supply, is the dual disequilibria relationship in which the excess of monetary injections over desired money holdings fuels spending in the markets for goods and services. This excess also spills over into the bond market and lowers the interest rate. The model’s slow adjustment process entails adjustments in fixed investment so that actual and normal (desired) capacity utilization fluctuate around each other. Over the long run investment is internally financed and regulated by the rate of profit. The current paper has three innovations. First, inventory investment is treated explicitly. Second, the SAM itself has been split into a current and capital account, thereby making it easier to derive the balance sheet counterpart of the flow matrix. Third, the paper discusses the stability properties of the 4 x 4 nonlinear differential equation system that describes the fast adjustment process. The key to stability is the negative feedback effect of business debt on investment. In the 4 x 4 case, a necessary condition for stability is that the reaction coefficient h2 on the debt term in the circulating investment equation be positive; a necessary and sufficient condition is that h23h2* where h2* is some critical value. In crossing this critical value, the system undergoes a Hopf bifurcation. Finally, if the model is reduced to a 3 x 3 system by considering a budget deficit that is wholly bond financed, then necessary and sufficient conditions for stability can be derived using the “modified” Routh-Hurwitz conditions. These stability conditions, in this case, imply that h2 > 0.
Download Working Paper No. 290 PDF (362.51 KB) -
Public Policy Brief No.56
02 November 1999
Risk Reduction in the New Financial Architecture
AbstractThe causes for the instability that has marked the financial system over the past decade lie deep in the economic theory that urges easy and efficient substitution of one piece of paper for another, in the technology-driven tight articulation of receipts and payments, and in the growth of leverage that diminishes the creditworthiness of major institutions when an interruption in their receipts requires them to seek funds. Many of the proposals aimed at reducing risk in the financial system, however, do not recognize these changes or their importance. The call for greater bank transparency, for example, fails to take into account both that bankers and regulators are jealous of their “privacy” and that financial markets, not banks, have lately become the more important player in the financial system. Guidelines are needed that reflect the new financial architecture: controls on the creation of leverage in the repo and derivatives markets and limits on banks’ freedom to back away from borrowers’ cross-border liabilities in currencies other than their own. When such preventive measures fail, then crisis management will require “standstill” agreements to encourage the continuation of something like normal economic life while the losses from financial failure are sorted out.
Download Public Policy Brief No. 56, 1999 PDF (183.57 KB)