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Articles 1 - 14 of 14

Full-Text Articles in Social and Behavioral Sciences

The Paradox Of Thrift And Crowding-In Of Private Investment In A Simple Is-Lm Model, Deepankar Basu Jan 2009

The Paradox Of Thrift And Crowding-In Of Private Investment In A Simple Is-Lm Model, Deepankar Basu

Economics Department Working Paper Series

This paper derives conditions for two key Keynesian propositions in a simple IS-LM model: (a) the paradox of thrift, and (b) the crowding-in of private investment ex- penditures by government expenditures. A linear specication of the model is then presented as a special case that can be used for empirical analysis. Using data for the US economy for the period 1959--2009, time series estimation of the linear model using instrumental variables regression shows that the paradox of thrift and crowding-in are real possibilities, especially in the sub-period, 1974 -- 2009, that excludes the Golden Age of capitalism.


The Bonus-Driven “Rainmaker” Financial Firm: How These Firms Enrich Top Employees, Destroy Shareholder Value And Create Systemic Financial Instability, James Crotty Jan 2009

The Bonus-Driven “Rainmaker” Financial Firm: How These Firms Enrich Top Employees, Destroy Shareholder Value And Create Systemic Financial Instability, James Crotty

Economics Department Working Paper Series

We recently experienced a global financial crisis so severe that only massive rescue operations by governments around the world prevented a total financial market meltdown and perhaps another global Great Depression. One necessary precondition for the crisis was the perverse, bonus-driven compensation structure employed in important financial institutions such as investment banks. This structure provided the rational incentive for key decision makers in these firms (who I call “rainmakers”) to take the excessive risk and employ the excessive leverage in the bubble that created the preconditions for the crisis. This paper presents and evaluates extensive data on compensation practices in ...


Exploring The Robustness Of The Balance Of Payments- Constrained Growth Idea In A Multiple Good Framework, Arslan Razmi Jan 2009

Exploring The Robustness Of The Balance Of Payments- Constrained Growth Idea In A Multiple Good Framework, Arslan Razmi

Economics Department Working Paper Series

This paper derives the balance of payments-constrained growth (BPCG) model as a special case of a three good framework that incorporates ex- portables, importables, and non-tradables. The conditions under which the canonical form of the BPCG rate can be derived are made explicit and the assumptions scrutinized. It is shown that the presence of non- tradables, substitutability between exportables and importables, and in- complete specialization in expenditure generally dampen the externally- constrained growth rate. These findings help explain why empirical esti- mates tend to overestimate the BPCG rate. Overall our findings under- score the observation that tests of the BPCG ...


Relations Of Production And Modes Of Surplus Extraction In India: An Aggregate Study, Amit Basole, Deepankar Basu Jan 2009

Relations Of Production And Modes Of Surplus Extraction In India: An Aggregate Study, Amit Basole, Deepankar Basu

Economics Department Working Paper Series

This paper uses aggregate-level data, as well as case-studies, to trace the evolution of some key structural features of the Indian economy, relating both to the agricultural and the informal industrial sector. These aggregate trends are used to infer: (a) the dominant relations of production under which the vast majority of the Indian working people labour, and (b) the predominant ways in which the surplus labour of the direct producers is appropriated by the dominant classes. This summary account is meant to inform and link up with on-going attempts at radically restructuring Indian society.


Economic Incentives And Social Preferences: A Preference-Based Lucas Critique Of Public Policy, Samuel Bowles, Sandra Polanía Reyes Jan 2009

Economic Incentives And Social Preferences: A Preference-Based Lucas Critique Of Public Policy, Samuel Bowles, Sandra Polanía Reyes

Economics Department Working Paper Series

Policies and explicit incentives designed for self-regarding individuals sometimes are less effective or even counterproductive when they diminish altruism, ethical norms and other social preferences. Evidence from 51 experimental studies indicates that this crowding out effect is pervasive, and that crowding in also occurs. A model in which self-regarding and social preferences may be either substitutes or complements is developed and evidence for the mechanisms underlying this non-additivity feature of preferences is provided. The result is a preference-based analogue to the Lucas Critique restricting feasible implementation to allocations that are supportable given the effect of incentives on preferences.


Must Improved Labor Standards Hurt Accumulation In The Targeted Sector? Stylized Analysis Of A Developing Economy, Arslan Razmi Jan 2009

Must Improved Labor Standards Hurt Accumulation In The Targeted Sector? Stylized Analysis Of A Developing Economy, Arslan Razmi

Economics Department Working Paper Series

This paper analyzes a stylized small open economy. The analysis classifies the economy into two tradable output-producing sectors: a manufacturing sector and a (mainly tourism-related) services sector. Assuming sectoral differences based on stylized facts, we explore the impact of higher labor standards in the manufacturing sector on the long-term prospects of the economy using comparative dynamic exercises to analyze changes in output, foreign direct investment, relative prices, sectoral distribution, and accumulation. We find, in particular, that imposing higher standards across the manufacturing sector could, in the long run, shift the structure of the domestic economy in favor of that sector.


Larger Groups May Alleviate Collective Action Problems, Sung-Ha Hwang Jan 2009

Larger Groups May Alleviate Collective Action Problems, Sung-Ha Hwang

Economics Department Working Paper Series

No abstract provided.


Son Preference, Sex Selection And The Problem Of Missing Women In India, Deepankar Basu Jan 2009

Son Preference, Sex Selection And The Problem Of Missing Women In India, Deepankar Basu

Economics Department Working Paper Series

This paper empirically tests for two competing explanations of the increasing sex ratio at birth (SRB) in India: hepatitis B and human intervention. Estimating a male- preferring stopping rule with data from three rounds of the National Family Health Survey in India (1992, 1998 and 2005), I find that the probability of a male birth varies significantly across birth parities. Using a novel proxy for hepatitis B in India - tribal status - I also find that hepatitis B has no impact on the probability of male birth. I conclude that human intervention explains the increasing SRB in India.


The Real Exchange Rate As An Instrument Of Development Policy, Arslan Razmi, Martin Rapetti, Peter Skott Jan 2009

The Real Exchange Rate As An Instrument Of Development Policy, Arslan Razmi, Martin Rapetti, Peter Skott

Economics Department Working Paper Series

Growth is endogenous in small open economies with substantial hidden or open unemployment, even under constant returns to scale. Growth promoting policies, however, have implications for the balance of trade, and two instruments are needed in order to achieve targets for both the growth rate and the balance of trade. The real exchange rate can serve as one of those instruments. Distributional con‡ict imposes constraints on real exchange rate policies, but in LDCs the main exchange-rate related distributional con‡ict may be over the sectoral distribution of pro…ts, rather than the real wage. This paper develops a model ...


Contest Success Functions: Theory And Evidence, Sung-Ha Hwang Jan 2009

Contest Success Functions: Theory And Evidence, Sung-Ha Hwang

Economics Department Working Paper Series

Contest success functions, which show how probabilities of winning depend on resources devoted to a conflict, have been widely used in the literature addressing appropriative activities (economics), international and civil wars (political science), and group conflict and selection (evolutionary biology). Two well-known forms of contest success functions predict contest outcomes from the difference between the resources of each side and from the ratio of resources. The analytical properties of a given conflict model, such as the existence of equilibrium, can be drastically changed simply by altering the form of the contest success function. Despite this problem, there is no consensus ...


International Trade, Factor Mobility And The Persistence Of Cultural-Institutional Diversity, Marianna Belloc, Samuel Bowles Jan 2009

International Trade, Factor Mobility And The Persistence Of Cultural-Institutional Diversity, Marianna Belloc, Samuel Bowles

Economics Department Working Paper Series

Cultural and institutional differences among nations may result in differences in the ratios of marginal costs of goods in autarchy and thus be the basis of specialization and comparative advantage, as long as these differences are not eliminated by trade. We provide an evolutionary model of endogenous preferences and institutions under autarchy, trade and factor mobility in which multiple asymptotically stable cultural-institutional conventions may exist, among which transitions may occur as a result of decentralized and un-coordinated actions of employers or employees. We show that: i) specialization and trade may arise and enhance welfare even when the countries are identical ...


Long Waves And Short Cycles In A Model Of Endogenous Financial Fragility, Soon Ryoo Jan 2009

Long Waves And Short Cycles In A Model Of Endogenous Financial Fragility, Soon Ryoo

Economics Department Working Paper Series

This paper presents a stock-flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors. Changes in firms’ and households’ financial practices produce long waves. The Hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles, and simulations illustrate stable limit cycles. The long waves are characterized by periodic economic crises following long expansions. Short cycles, generated by the interaction between effective demand and labor market dynamics, fluctuate around the long waves.


The Structuralist Growth Model, Bill Gibson Jan 2009

The Structuralist Growth Model, Bill Gibson

Economics Department Working Paper Series

This paper examines the underlying theory of structuralist growth models in an effort to compare that framework with the standard approach of Solow and others. Both the standard and structuralist models are solved in a common mathematical framework that emphasizes their similarities. It is seen that while the standard model requires the growth rate of the labor force to be taken as exogenously determined, the structuralist growth model must take investment growth to be determined exogenously in the long run. It is further seen that in order for the structuralist model to reliably converge to steady growth, considerable attention must ...


Bretton Woods Ii And The Emerging Economies: Lazarus, Phoenix, Or Humpty Dumpty?, Arslan Razmi Jan 2009

Bretton Woods Ii And The Emerging Economies: Lazarus, Phoenix, Or Humpty Dumpty?, Arslan Razmi

Economics Department Working Paper Series

Several studies have commented on the emergence of a new inter- national monetary system in the post-Asian crisis years. The current international financial crisis has, however, put Bretton Woods II under considerable strain. This paper analyzes the sustainability of the pre- crisis order from an emerging country perspective. A simple framework in which agents have a choice between financial and real assets is constructed in order to explore possible consequences of the shocks that emerging economies are currently experiencing. Stock and flow implications are analyzed. Assuming that recent events would have reinforced monetary authorities desire to maintain an adequate cushion ...