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Regional Inequality, Industrial Policy, and Land Reform

Paper Session

Friday, Jan. 3, 2020 10:15 AM - 12:15 PM (PST)

Manchester Grand Hyatt, Cortez Hill A
Hosted By: Association for Evolutionary Economics
  • Chair: Kosta Josifidis, University of Novi Sad

Time, Institutional Change, and Regional Income Distribution in the United States

James T. Peach
,
New Mexico State University
Richard Adkisson
,
New Mexico State University

Abstract

The lowest income counties in the United States are very different from the nation’s highest income counties. The lowest income counties are geographically concentrated. The low income counties have very different demographic and social characteristics. Peach (1996) examined regional income patterns of counties circa 1990.Peach found racial and ethnic differences and differences in educational attainment that were difficult to ignore. Since 1990, there have been several important institutional changes that could have potentially impacted regional income distribution. For example, there has been tax reform, welfare reform, implementation of NAFTA, granting of earned income tax credits, increased spending on social programs, the shale oil revolution, and other structural changes in the economy. There is also the common assumption that markets will lead to regional income convergence. The question asked by this paper is this. After nearly three decades of institutional change, has regional income inequality (focusing on the 100 lowest and 100 highest income counties) changed substantially?

Industrial Policy : An Institutional Economic Framework for Assessment

Lukasz Mamica
,
Cracow University of Economics
Wilfred Dolfsma
,
Wageningen University & Research

Abstract

In one form or another industrial policy has never been off the portfolio of government policies. Industrial policy, the intentional attempt by government to directly influence investment and resource allocation decisions by private companies generally, aims to ensure societal goals are reached that a market will not deliver, and can take a number of different forms. Industrial policy thus, by definition, is aimed to progressively change the course of economic development (cf. Bush 1989). The forms industrial policy takes is best understood in terms of the formal and informal institutions that an industrial policy seeks to alter (Dolfsma 2013, 2019). Location decisions, levels and directions of innovation efforts, decisions affecting employment levels are among the different industrial policy measures adopted (e.g. Dolfsma & Seo 2013). There is also policy that more indirectly impacts private companies, among which are product, consumer and production (safety) regulations. In this paper we focus on industrial policy that directly impacts private firms.

Economists have tended to generally be dismissive of industrial policy as it might move the economy away from the level economic playing field that is believed to benefit the economy as a whole. Indeed, the evidence of the effects of industrial policy are mixed (OECD 2014). In this paper we offer what we believe is a start for an understanding of why industrial policy may not always have been successful. In doing so, we suggest a generic way of how, from an institutional economic point of view, government policy in general and industrial policy in particular may be analysed. Institutional economic literature would suggest to identify dimensions of economic activities that are relatively stable over time yet that also allow one to cater policies to relevant industry characteristics. Thus, one may formulate catered policies that can be in place over an extended period of time.

Institutional Transformation and Shifting Policy Paradigms: Reflections on Land Reform in Africa

Howard Stein
,
University of Michigan

Abstract

Development economists like Gunnar Myrdal working in the institutional tradition saw land reform as changing the institutional structure governing people’s relationship with land. The early imperative of progressive institutional transformation focused on redistributing land to the rural poor with a view that this was a mechanism to reduce inequality and raise their incomes. Where large amounts of land was idly kept by the wealthy, this could dramatically improve food production. There was also the view that agriculture could be a source of raw material for industry and augmenting rural incomes could boost the demand for new manufacturing products. Closely associated with land redistribution were a series of “auxiliary reforms to provide credits, agricultural extension services, and so forth”. However, Myrdal warned in 1974 “But without more fundamental reforms of land ownership, these strivings for "community development" have proven ineffective. Until now they mostly have been a way of escaping land reform, which is why they have failed”. Over time, as development economics became increasingly dominated by neoclassicals this warning was ignored. There was also a dramatic shift away from the broader auxiliary reforms toward a singular focus on individual farmer property rights. In line with these changes, today, reform in Africa focuses more on formalizing property rights by demarcating boundaries, allocating individual plot titles and expanding legal institutions to adjudicate land disputes. The proponents of titling argue formalization will bring long sought prosperity to rural Africa by improving security of land particularly for women while reducing conflict, better access to rental and land markets, and providing access to credit market with formalized collateral. They argue the approach will be particularly beneficial for the poor since their assets will finally be recognized. With proper legal titles, poor people will be able to liquidate their assets readily to raise cash, start up new businesses with the money or use the titles to borrow funds to invest in land and raise productivity leading to higher incomes. The paper will trace the evolution of land policy in Africa in recent decades to identify the players and vested interests underlying these changes. The claims of the proponents of titling will be assessed by drawing on a 10 year study (2009-19) of land formalization in Tanzania which has covered more than 2000 households in 40 villages.

The State as Innovator of First Resort: A New Approach to the National System of Innovation

Giovanna Vertova
,
University of Bergamo

Abstract

This paper has three aims. First, it addresses some theoretical problems involving the role of the state in the evolutionary literature on National Systems of Innovation (NSI). In the context of the pioneering works of Chris Freeman (2008), Bent-Åke Lundvall (2010), and Richard Nelson (1993), recent literature has neglected the explicit role of the State, despite the fact that the NSI theoretical tool has been widely used in considering and proposing policies. In the current argument for policies that involve “less State and more market,” the State’s (and other public agents’) active and direct involvement in innovation and technological change is missing.

Second, the paper challenges the prescriptive tradition, wherein the State comes into an NSI only indirectly, as an institution whose task is to supply the key elements for creating and maintaining a favorable environment for firms’ innovative activities. The State must only supply and adjust the “proper” physical and social infrastructures, in order to enhance firms’ ability to innovate. Thus, government innovation policy is relegated to a regulative task, leaving private capitalist firms to deal with innovations. The State must create and maintain competitive market structures in order to let firms compete among themselves, so that the most innovative will survive. The more recent “Schumpeter-meets-Keynes” literature, while different in many respects, also incorporates an indirect role for the State.

Third, the paper introduces an alternative approach to the role of the State in innovation and research activities: the State must intervene directly in some innovative activities and research, thus becoming an “innovator of first resort.” In order to do just that, a clear distinction about the market-driven innovations of private firms vs. social-driven innovations by the State (or other public agents) is needed. The point here is not for the State to just create public knowledge that private firms can use. Instead, the State should first carry out innovations directly (than means creating new knowledge and applying it to production processes in a completely public value chain), and second, address these innovative activities toward more basic social needs, which may be better off in public hands than in free market competition. The State has to become an “innovator of first resort”: the innovative State should do something different from what private firms do, having in mind some primary social needs.

Can Co-Determination Help Workers Save Capitalism from the Capitalists?

Barbara Hopkins
,
Wright State University

Abstract

The evolution of corporate governance in the United States towards a principle of maximizing shareholder value combined with the process of financialization has led to an enterprise practice in which extraction of value eclipses the creation of value. This transformation over the past 50 years represents a regressive institutional change built on the myth that stockholders are analogous to Smith’s iconic Baker, who owned his business and produced bread. The increasing gap between management and the actual process of production can be viewed as a strengthening of ceremonial practice in valuation and a diminishing of instrumental that is undermining the ability for capitalism to adequately provide for the members of society. Co-determination, the German law of corporate governance requiring representation of labor on corporate boards, could shift the purpose of corporations away from streaming income to a rentier class and towards provisioning and generating sustainable livelihoods and away from risky behavior that reinforces inequality. Co-determination would also increase instrumental judgement by incorporating representatives of labor on the board because workers would have greater understanding of the production process and the product. In this paper, I describe the shift in decision-making and then review the literature on co-determination in Germany and Sweden. Finally, I argue that co-determination could improve the performance of firms.
Discussant(s)
Kosta Josifidis
,
University of Novi Sad
Tae-Hee Jo
,
State University of New York-Buffalo State
JEL Classifications
  • O1 - Economic Development
  • B5 - Current Heterodox Approaches