Issues in Radical Economics

Paper Session

Friday, Jan. 6, 2017 8:00 AM – 10:00 AM

Swissotel Chicago, Monte Rosa
Hosted By: Union for Radical Political Economics
  • Chair: Robin Hahnel, Portland State University

Falling Profits and Military Expenditures: An Empirical Analysis

Adem Yavuz Elveren
,
Fitchburg State University
Ali Cevat Tasiran
,
Middle East Technical University-Northern Cyprus Campus

Abstract

This paper investigates the nexus of military expenditures and inequality and profits. To the best of our knowledge, this is the first systematic quantitative study about the relationships between these three variables as a whole. The effects of military expenditures on economic growth are examined in many studies. Dunne and Uye (2010) review hundreds of such papers. Some other works focus on the relationship between military expenditures and profits (Elveren and Hsu 2015). There are also studies explaining the relationship between military expenditures and income inequality (Ali 2007; Töngür and Elveren 2016).
This Threevariate setting of MIP is quite important since it provides a better picture of the internal relationships of the dependent variables together with their respective explanatory blocks of variables. We treat military expenditures, inequality and profit as three latent variables in an inner model and employ their corresponding blocks of factors as manifest variables in an outer model. The approach, we follow in this paper is the non-parametric technique of Partial Least Squares Path Modelling (PLS-PM) which is formulated first by Wold (1975). It is a soft modelling technique, which is particularly useful when the theoretical foundation of the problem, such as in the Threevariate setting, is scarce, measurements are not well-defined and the empirical distributions of the dependent variables are not clear. The study finds out the variables, which are statistically important in the modelling. The findings of the general pooled analysis, based on 21 countries for the period of 1988-2008 suggest that while military expenditures have a negative effect on income (inequality), and income (inequality) has a negative impact on profit rates, military expenditures have (relatively small) positive effect on profit rates. However, these results remarkably change once unobserved heterogeneity is considered. Accordingly, based on four segments, although the negative effect of income (inequality) on profits remains the same for each segment, for some segments the effect of military expenditures on income (inequality) and on profit rates become positive.

The Impact of a Changing Labor Market on Low-Wage Careers

Jeannette Wicks-Lim
,
University of Massachusetts-Amherst

Abstract

Wage inequality in the U.S. labor market has increased dramatically over the past several decades. Higher-wage workers have captured the largest wage gains, while average wages have stagnated, and wages at the low-end of the distribution have fallen in real value. Such changes may make it more difficult for minimum and near-minimum wage workers to make meaningful advances in their earnings, increasing the prevalence and length of low-wage careers. This paper examines the long-term earnings trajectory of workers using a relatively under-utilized data set produced by the U.S. Census Bureau: the SIPP SSB and associated Gold Standard files that uniquely links person-level micro-data from a nationally representative household survey (SIPP) with administrative earnings data from the IRS (W-2 forms) spanning from 1978 to 2011. Preliminary analysis of this data indicates that while the share of low-wage workers has remained relatively constant from 1979 to 2011, workers earn low-wages longer, and increasingly for at least 6 years out of a 10-year period. Black workers experience more pronounced increases in these trends. Additionally low-wage workers are older, and therefore more likely to be responsible for a significant share of their households’ incomes.

The Cost of Job Loss, Long-Term Unemployment, and Wage Growth

Aaron Pacitti
,
Siena College

Abstract

Since the end of the Great Recession in June 2009, wage growth has been substantially slower than in previous recoveries. Unemployment has fallen to a level consistent with what many economists consider to be full employment. However, a stronger labor market as measured by conventional measures of slack has not produced significant nominal wage growth. This paper uses four estimates of the cost of job loss—the one year income loss associated with job loss—in addition to other labor market slack variables, including comprehensive multi-variable indexes developed by Federal Reserve economists, in a wage Phillips curve for three sample periods and finds that the cost of job loss better explains and forecasts wage growth, especially since 2009. The findings suggest that policy makers must consider broader measures of workers’ bargaining power and labor market slack, including political dimensions such as social insurance and those relating to unemployment duration and long-term unemployment, to better understand recent labor market dynamics.

Pattern of Industrial Growth in West Bengal during 1980-1991: Structural Demand and Agriculture-Industry Relations

Anirban Karak
,
University of Massachusetts-Amherst

Abstract

For the period 1980-1991, we can clearly identify three trends in the industrial development of West Bengal – a secular relative decline in terms of employment and value added in manufacturing industries vis-à-vis other states, an ancillarization and flexibilization of production into small-scale factories with less than 20 workers, and a differential impact of this ancillarization on basic goods and consumer goods industries, with the former performing much better than the latter. Viewed through the theoretical lens of structural demand and agriculture-industry relations, the stagnation of consumer goods industries during this period poses a puzzle, considering the spectacular growth of agricultural output during the 1980s. I suggest that tying together three factors – the impact of the ‘Green Revolution’ on West Bengal’s agriculture, the nature and effect of the Left Front’s land reforms, and the role of rural commercial capital, can in turn hold together three outcomes in a single explanation – high agricultural growth, mass poverty among the rural poor and the poor growth of consumer goods industries during 1980-1991.
Discussant(s)
David Mathew Fields
,
University of Utah
Wei Zhang
,
Renmin University of China
Sergio Camara-Izquierdo
,
Metropolitan Autonomous University-Azcapotzalco
Filipe Possa Ferreira
,
University of Campinas
JEL Classifications
  • B5 - Current Heterodox Approaches