The Neoclassical Theory of Aggregate Investment and its Criticisms

This paper surveys the neoclassical theory of aggregate investment and its criticisms. We identify four main strands in neoclassical investment theory: (i) the traditional Wicksellian model; (ii) the Fisherian ‘array-of-opportunities’ approach; (iii) the Jorgensonian model; (iv) the now prevailing adjustment cost models. We summarize each approach, discuss the main conceptual issues, and highlight similarities and differences between them. We also provide a systematic summary and discussion of the main criticisms that have been leveled at each of these models and highlight some unresolved theoretical issues

Old and New Formulations of the Neoclassical Theory of Aggregate Investment: A Critical Review

This paper surveys the neoclassical theory of aggregate investment and its criticisms. We distinguish four main formulations of this theory: the traditional ‘Wicksellian’ investment function; the Fisherian ‘array-of-opportunities’ approach (as Witte Jr. called it); the Jorgensonian model; the now prevailing adjustment-costs models. With respect to other papers criticizing the neoclassical theory of investment, we do not appeal to market imperfections. We instead argue that all four formulations present serious theoretical difficulties, even conceding free competition

A brief essay on the financialization of agricultural commodity markets

During the 2000s agricultural commodity derivatives markets were flooded by a “wall of money” coming from financial investors. In this essay I outline the main facts about the increasing presence and impact of financial investors in agricultural commodity markets and I discuss the main empirical works that tried to assess whether financial investors have affected agricultural prices in recent years

Do financial investors affect commodity prices? The case of Hard Red Winter Wheat

The aim of this paper is to assess empirically whether speculative financial investments have affected wheat price dynamics in recent years. To address this issue we will (1) analyze recent agricultural price dynamics and their drivers (2) outline the process of ‘financialization’ of agricultural commodity markets, identifying the macroeconomic, monetary and legislative factors which favored it and (3) present an econometric analysis using Hard Red Winter (HRW) wheat as a case study. Since 2007 HRW wheat price fluctuations have been positively related to US stock market returns and oil price movements. These correlations appear to be determined by commodity index traders, a category of financial investors, since both these relationships proved to be spurious, with the most tracked commodity index as the confounding variable.Agricultural Commodity Prices, Global Commodity Crises, Financialization, Commodity Futures Markets, Commodity Index Trading, Agricultural Markets, Commodity Futures Pricing

Autonomous Demand and the Investment Share

This paper looks at the effect of demand shocks on the investment share of the economy. Using panel data on 20 OECD countries, we show that the rate of growth of autonomous demand (exports, public spending and housing investment) is positively correlated with subsequent values of the share of business investment in GDP. By means of an instrumental-variables strategy, we confirm a positive effect of demand dynamics on the business investment share. We instrument autonomous demand with US demand for imports interacted with exposure to trade with the US, openness to trade of a country’s main export destinations, and military spending. A permanent 1% increase in autonomous demand growth raises the investment share by 1.5 to 1.9 percentage points of GDP in our preferred panel IV specification. Our results provide empirical support for the view that the influence of aggregate demand on capital accumulation can be a major source of hysteresis. Our results are inconsistent with the canonical New Keynesian 3-equations model, the Neo-Kaleckian model with flexible equilibrium utilization and Classical-Marxian growth models. A positive influence of autonomous demand on the investment share is instead compatible with demand-led models in which capacity adjusts to demand in the long-run

Partisanship and Local Fiscal Policy: Evidence from Brazilian Cities

We study the role of political parties in shaping local fiscal policy in the context of Brazilian cities in the 2004-2016 period. Using a regression-discontinuity design, we find no effect of left-wing mayors on the size of the city government nor on the allocation of spending across main budget categories (current spending, investment and personnel). We do find a modest, significant and robust positive effect on the share of social expenditures. The (close) election of a left-wing mayor tends to raise the share of social expenditures by around 0.6 percentage points in our preferred RD specification. We then explore possible mechanisms which could bring about substantial fiscal policy convergence between political parties in Brazilian cities. We exploit oil-related revenue windfalls to explore the role of institutional constraints, and build an index of Tiebout competition to measure the role of the latter. We find support for the institutional constraints hypothesis in explaining the limited extent of spending allocation effects, and little support for the Tiebout-competition hypothesis

Institutional shocks and economic outcomes: Allende’s election, Pinochet’s coup and the Santiago stock market

To study the effect of political and institutional changes on the economy, we look at share prices in the Santiago exchange during the tumultuous political events that characterized Chile in the early 1970s. We use a transparent empirical strategy, deploying previously unused daily data and exploiting two largely unexpected shocks which involved substantial variation in policies and institutions, providing a rare natural experiment. Allende’s election and subsequent socialist experiment decreased share values, while the military coup and dictatorship that replaced him boosted them, in both cases by magnitudes unprecedented in the literature

IC Technology and Learning: An Impact Evaluation of [email protected]

In this paper we present a counterfactual evaluation of the effect of ICT resources at school on student achievements conducted in Italy. In 2009 156 classes at 6th grade were endowed with additional resources earmarked for purchasing ICT equipments only. By selecting an equivalent number of classes in the same schools we are able to conduct an evaluation of the causal effect of ICT on student achievements, controlling for their initial level. Despite a significant financial investment (in the order of 1500 Euros per student over a three year period), results are very small: if we take the most encouraging results, the average improvement associated to the programme would be 3 test points, corresponding to 17% of a standard deviation. Even if it might be argued that our estimate represents a lower bound for the real effect, overall we conclude that the intervention has been far from being cost effective

Il settore delle costruzioni in Italia tra crisi e trasformazione

Since the mid-Nineties and until 2005 the italian construction sector experienced an exceptional expansive cycle, the most intense in the last four decades. Construction was allowed to boom by a mix of factors (demographic, financial, increase in public works expenditure) and was driven by new residential construction. A slowdown followed, starting in 2006, which became a dramatic slump since 2008. One relevant issue that emerges is the pro-cyclical role played by public works expenditure during the recent construction cycle. Moreover, evidence suggests that the italian construction sector is not experiencing only a cyclical over-production crisis, but also a deeper process of structural change. The sub-sectors which drove construction in the 2000s appear destined to see their incidence decreasing, while new drivers are emerging. The progressive integration between the energy industry and the construction sector appears to be the most important trend