Is There an Equilibrium Rate of Unemployment in the Long Run?

Distinguishing between profit led and growth led demand regimes, we analyze the conditions of existence and stability of long run equilibrium of unemployment. The model we employ has at its center the relation between growth and distribution. Growth can be either wage led or profit led. Distribution itself is a function of the unemployment rate, with higher unemployment leading to a higher profit share. We use Okun's Law to close the model, making the change of the rate of unemployment a function of growth. The interesting result of our analysis is that in profit led demand regime the short run and long run equilibrium are stable. However, if the demand regime is wage led, the same conditions that guarantee stability of the goods market equilibrium in the short run render impossible the existence of a long run equilibrium rate of unemployment, and vice versa. Thus, if Kalecki's proposition that higher wages lead to higher growth is true, there will be no equilibrium rate of unemployment in the long run that serves as an anchor for the economic system. A revised version of the paper is forthcoming in the Review of Political Economy. Please contact the author for the revised version.growth theory; unemployment; keynesian economics

Financialization and the Global Economy

In this chapter from the forthcoming book, The Political Economy of Financial Crises, edited by Gerald Epstein and Martin H. Wolfson, (Oxford University Press, 2012) Engelbert Stockhammer�discusses ‘financialization’, i.e. changes in the role of the financial sector. This will highlight (1) changes in household behavior, in particular with regards to household debt, (2) changes in the behaviour of non-financial businesses, such as shareholder value orientation and increased financial activity and (3) changes in the financial sector, in particular the emergence of the (hardly regulated) shadow banking sector, a shift towards household credit (rather than business credit) and a shift to investment banking/fee generating business. Second, the chapter discusses the international dimension of financialization. Here the liberalization of capital flows and its consequences, the determination of exchange rates by capital flows (rather than by current account disequilibria), will be discussed. International financial liberalization has not fulfilled the neoliberal promise of generating investment-based growth, but rather has given rise to a series of financial crises that were typically driven by a swing of capital inflows (‘capital flow bonanza’) followed by capital flow reversals. Third, the chapter offers an interpretation of the finance-dominated accumulation regime as having given rise to two distinct growth models (based on Stockhammer 2010): a credit-financed consumption-driven growth model (mostly in Anglo-Saxon countries) and a export-driven growth model (in Germany, Japan, and, possibly, China). Both growth models suffer from a structural demand deficiency, which is due to wage suppression, but each try to overcome this by different means (credit-financed consumption or export orientation). The chapter thus highlights how financialization with its domestic and international effects have interacted with a polarization of income distribution to generate the structural imbalances that led to the crisis 2007-09.

The Slowdown of Accumulation and the Rise of European Unemployment

The paper aims at testing empirically two Keynesian hypotheses. First that increasing financial investment is one of the major causes for the slowdown in capital accumulation and, second, that this slowdown is one of major factors for rising unemployment rates. After presenting evidence from the National Accounts for the rising importance of dividend and interest income, econometric tests are performed for Germany, France, UK and the USA, and for the employment regressions, additionally for Italy. The choice of countries being determined by the interest in European unemployment and limited data availability. Overall, the findings are supportive of both hypotheses.European Unemployment; Keynesian theory; capital accumulation

Financialization and the Slowdown of Accumulation

Over the past decades financial investment of non-financial businesses has been rising and accumulation of capital goods has been declining. The first part of the paper offers a novel theory to explain this phenomenon. Financialization, the shareholder revolution and the development of a market for corporate control have shifted power to shareholders and thus changed management priorities, leading to a reduction in the desired growth rate. In the second part the link between accumulation and financialization is tested econometrically by means of a time series analysis of aggregate business investment for USA, UK, France, and Germany. Extensive test of robustness are performed. For the first three countries evidence that confirms the negative effect of financialization on accumulation is found. A revised version of the paper is forthcoming in the Cambridge Journalof Economics. Please contact the author for the revised version.financialization; business investment; class analysis; theory of the firm

Some Stylized Facts on the Finance-Dominated Accumulation Regime

While there is an agreement that the Fordist accumulation regime has come to an end in the course of the 1970s, there is no agreement on how to characterize the post-Fordist regime (or if a such is already in place). The paper seeks put together various arguments related to financialization (in the broad sense) from a macroeconomic point of view and investigate the relevance of these arguments by means of an analysis stylized facts for EU countries. The paper discusses changes in investment behaviour, consumption behaviour and government expenditures, investigating to what extent changes are related to financialization. Households experience higher debt levels. Rising profits of businesses come with only moderate investment. The notion of a “finance-dominated” accumulation regime is proposed to highlight that financial developments crucially shape the pattern and the pace of accumulation. The finance dominated accumulation regime is characterized by a mediocre growth performance and by higher volatility. However, so far deregulated financial markets have not lead to major financial crises in advanced capitalist economies. A possible reason for this is that the size of the state sector has not been substantially reduced despite neoliberal attempts to do so.financialization, finance-dominated accumulation regime, macroeconomics consumption, investment, financial system, financial stability

POLITICAL PARTY AND PRESSURE GROUP CONSIDERATIONS IN AGRICULTURAL POLITICS

Political Economy,

Rebalancing the Euro Area: The Costs of Internal Devaluation

This paper investigates the economic costs of rebalancing current account positions in the Euro area by means of internal devaluation. Internal devaluation relies on wage suppression the deficit countries. Based on an old Keynesian model we estimate a current account equation, a wage-Phillips curve and an Okun’s Law equation. All estimations are carried out for a panel of twelve Euro area members. From the estimation results we calculate the output costs of reducing current account deficits. Greece, Ireland, Italy, Portugal and Spain (GIIPS) had, on average, current account deficits of 8.4% of GDP in 2007. To eliminate these current account deficits, a reduction of GPD by some 47% would be necessary. In principle there are two ways that trade imbalances could be resolved: deflationary adjustment in the deficit countries or inflationary adjustment in the surplus countries. Presently, the burden of adjustment is exclusively on the deficit countries. Our results indicate that the economic costs of this adjustment to those countries are equivalent to the output loss of the Great Depression. An adjustment of the surplus countries would increase growth and it would come with higher inflation, but it would allow rebalancing without a Great Depression in parts of Europe

The Male-Female Gap in Physician Earnings: Evidence from a Public Health Insurance System

Empirical evidence from U.S. studies suggests that, on average, female physicians earn less than their male counterparts. This gap in earnings does not disappear when individual and market characteristics are con- trolled for. This paper investigates whether a gender earnings difference can also be observed in a health care system predominantly financed by public insurance companies. Using a unique data set of physicians' earn- ings recorded by a public social security agency in an Austrian province between 2000 and 2004, we find a gender gap in average earnings of about 32 percent. A substantial share of this gap (20 to 47 percent) cannot be explained by individual and market characteristics, leaving labor market discrimination as one possible explanation for the observed gender earn- ings difference of physicians.Health care financing; physician earnings; wage composition

The Convergence of Health Care Financing Structures: Empirical Evidence from OECD-Countries

In this paper we concentrate on the question whether the financing structure of the health care systems converges. In a world of increasing economic integration convergence in health care financing (HCF) and, hence, decreasing differences in HCF across countries enhance individuals’ (labour) mobility and support harmonization processes. As an indicator for convergence we take the public financing ratio in % of total HCF and in % of GDP. The major finding is that HCF in the OECD countries converged in the time period 1970 – 2005. This conlusion also holds when looking at smaller sub groups of countries and shorter time periods. However, we find evidence that countries do not move towards a common mean and that the rate of convergence is decreasing over time.Convergence, health care system, health care financing