51,857 research outputs found
Wealth and Democracy
The renewed debate over inequality has highlighted a set of deficits in much of the last fifty-plus years of thinking on the topic. The late twentieth-century tradition of thinking about distributive justice largely assumed (1) that market dynamics would produce stable and tolerable levels of inequality; and (2) that a relatively powerful, competent, and legitimate state could effectively redistribute to mitigate what inequality did arise. What was largely overlooked in this thought and has since risen to central attention is the prospect that (1) accelerating levels of market-produced inequality will (2) undermine the legitimacy and efficacy of the state and disable the political community from effectively pursuing distributive justice. This paper explains how the earlier assumptions arose, defined the boundaries of distributive justice for decades, and were undermined by developments from both the political left and the political right. At present, the dynamics of inequality appear to be self-perpetuating and self-accelerating, and much of earlier thinking on the topic has been rendered irrelevant by the erosion of its mistaken premises. Only a democratic effort to reconstitute a competent and legitimate state has any prospect of making inequality a tractable problem subject to effective intervention
A New-Growth Perspective on Non-Renewable Resources
This article reviews issues related to the incorporation of non-renewable resources in the theory of economic growth and development. As an offshoot of the new growth theory of the last two decades a series of contributions have studied endogenous technical change in relation to resource scarcity. We discuss the main approaches within this literature and consider questions like: How is the new literature related to the wave of resource economics of the 1970s? What light is thrown on the limits-to-growth issue? Does the existence of non-renewable resources have implications for the controversies within new growth theory?endogenous growth; innovation; non-renewable resources; knife-edge conditions; robustness; limits to growth
The Unemployment Benefit System: a Redistributive or an Insurance Institution?
In this paper we analyze how the composition of labor taxation affects unemployment in a unionized economy with capital accumulation and an unemployment benefit system. We show that if the unemployment benefit system is gross Bismarckian then the unemployment rate is reduced if wage taxes are decreased (and thus payroll taxes are increased). However, if the unemployment benefit system is net Bismarckian then the unemployment rate does not depend on how the system is financed. Besides, in a Beveridgean system the labor tax composition does not affect the unemployment rate if and only if the unemployed do not pay taxes and the employed pay a constant marginal tax rate. We also analyze when an unemployment benefit budget-balanced rule makes the economy to have a hysteresis process.wage tax, unemployment benefit system, payroll tax
Activist stabilization policy and inflation : the Taylor rule in the 1970s
A number of recent studies have suggested that activist stabilization policy rules responding to inflation and the output gap can attain simultaneously a low and stable rate of inflation as well as a high degree of economic stability. The foremost example of such a strategy is the policy rule proposed by Taylor (1993). In this paper, I demonstrate that the policy settings that would have been suggested by this rule during the 1970s, based on real-time data published by the U.S. Commerce Department, do not greatly differ from actual policy during this period. To the extent macroeconomic outcomes during this period are considered unfavorable, this raises questions regarding the usefulness of this strategy for monetary policy. To the extent the Taylor rule is believed to provide a reasonable guide to monetary policy, this finding raises questions regarding earlier critiques of monetary policy during the 1970s
Attitude polarization
Psychological evidence suggests that peopleâs learning behavior is often prone to a âmyside biasâ or âirrational belief persistenceâ in contrast to learning behavior exclusively based on objective data. In the context of Bayesian learning such a bias may result in diverging posterior beliefs and attitude polarization even if agents receive identical information. Such patterns cannot be explained by the standard model of rational Bayesian learning that implies convergent beliefs. As our key contribution, we therefore develop formal models of Bayesian learning with psychological bias as alternatives to rational Bayesian learning. We derive condi- tions under which beliefs may diverge in the learning process and thus conform with the psychological evidence. Key to our approach is the assumption of ambiguous beliefs that are formalized as non-additive probability measures arising in Choquet expected utility theory. As a specific feature of our approach, our models of Bayesian learning with psychological bias reduce to rational Bayesian learning in the absence of ambiguity.
Attitude polarization
Psychological evidence suggests that peopleâs learning behavior is often prone to a âmyside biasâor âirrational belief persistenceâin contrast to learning behavior exclusively based on objective data. In the context of Bayesian learning such a bias may result in diverging posterior beliefs and attitude polarization even if agents receive identical information. Such patterns cannot be explained by the standard model of rational Bayesian learning that implies convergent beliefs. As our key contribution, we therefore develop formal models of Bayesian learning with psychological bias as alternatives to rational Bayesian learning. We derive conditions under which beliefs may diverge in the learning process and thus conform with the psychological evidence. Key to our approach is the assumption of ambiguous beliefs that are formalized as non-additive probability measures arising in Choquet expected utility theory. As a speciâŠc feature of our approach, our models of Bayesian learning with psychological bias reduce to rational Bayesian learning in the absence of ambiguity.
Potential Output: Measurement Methods, "New" Economy Influences and Scenarios for 2001-2010 - A comparison of the EU-15 and the US.
This paper presents an overview of the various methodologies for estimating potential output at the macroeconomic level. Emphasis was laid on the production function approach which is used together with the univariate statistical HP filter method to produce potential output estimates for the US and the EU15 economies (as well as the individual EU Member States) from 1966-2002. The paper also assesses the role of "new" economy influences on potential growth and provides estimates of the likely contribution to past and future output capacity from this source. Finally, potential growth scenarios are given for the EU15 as a whole and the US for the period 2001-2010, with the central scenario pointing to annual average growth rates of 2 ĂŸ% for the EU15 and 3% for the US over the next ten years.macroeconomic analysis, potential growth, potential output
Monetary policy stress in EMU during the moderation and the global crisis
JEL:C22, E52, E58This paper re-examines the problem of monetary policy stress in the EMU, both prior to
the crisis as well as after its outbreak. It aims to (firstly) reconfirm that monetary policy
during the great moderation (i.e. until late 2008) was responsible for fuelling the process
of imbalance accumulation in the EMU, and (secondly) to determine to what extent the
stress was caused by macroeconomic divergences.
We employ a forward-looking Taylor-type monetary policy reaction function with realtime
forecasted data to mimic the ECB monetary policy during the great moderation. The
estimated coefficients are subsequently used to create counterfactual series of ruleconsistent
country-specific interest rates and compute monetary policy stress in EMU
individual member states.
The results confirm that peripheral countries were exposed to risks emerging from
excessively low interest rates, while the âcoreâ countries had to live with too-high interest
rates, and the stress was generally stronger in the former case. Interestingly, the bulk of it
was non-fundamental, i.e. not caused by inflation and output gap differentials between
countries. There are several potential sources of this stress and we show that missed
forecasts were making an important contribution and they were mainly responsible for
pushing the interest rate below its rule-consistent level
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