Growth, Wealth and Finance
Friday, Jan. 3, 2020 2:30 PM - 4:30 PM (PDT)
- Chair: Mona Ali, State University of New York-New Paltz
Wealth Structures and Income Distribution of United States Households Before and After the Great Recession
AbstractThis paper investigates the empirical relationship between household wealth composition and income inequality in the USA, proxied by households’ relative position in the income distribution. Previous research highlights wealth–income interactions as important driver of inequality, but less is known about whether wealth composition is conducive to sustained improvements in relative income across households. Using non-parametric median slope analysis on the U.S. Survey of Consumer Finances between 1989 and 2013, the paper examines patterns of empirical regularities between wealth composition and relative income, finding significant differences over time and between income, gender, racial, and intergenerational groups. Higher relative holdings of other property, business equity, financial investment assets, retirement and insurance assets, and secured debt are found to be associated with higher position in the income distribution; to be more resilient to losses after the Great Recession; and not to be enjoyed equally, particularly by the poorest 20% of households and millennials.
Anglo-American Capitalism and the International Economic (Dis)order
AbstractBrown (2016) and others refer to the present as an interregnum between the existing order (neoliberalism) and the birth of another. But, as Oliver and Pemberton (2004) remind us, paradigm shifts in economic policy tend to be few and far between. (Their historiography of Keynesianism in British policy reveals a punctuated process as Keynesian instruments were experimented with, slowly institutionalized, but never adopted wholesale as policy evolved into "Keynesian-plus".) Whether our present constitutes an interregnum requires a deeper analysis of the neoliberal order. Often characterized as ‘deregulated markets’ or ‘free trade', neoliberal capitalism, in fact, requires state-craft. This was well recognized by the Geneva school neoliberals who sought to build the legal and institutional framework to insulate the world market order from national intervention (Slobodian, 2018). I will argue that Hayek’s ‘catallaxy’ or 'market order' came closest to fruition in the Anglo-American financial system whose apex is the NY-LON axis (Wójcik, 2013). Influenced by Keynes, Minsky (1967),noted that capitalism is essentially a financial system. And as Marx pointed, out the logic of capitalism is expansionary or cosmopolitan. Financial networks are transnational - involving both territorialization as well as deterritorialization - while macroeconomic theory is based on the nation-state. While theorized by historians and IR theorists, 'Anglo-America' (Bell 2016) has been under-theorized in international political economy. Tracing the genealogy of ‘Anglo-America’ to the failures of Bretton Woods and the growth of the London Euromarkets, I illustrate how monetary governance as well as legal and financial innovation played an instrumental role in carving out the Anglo-American financial order and assess the impact of the Global Financial Crisis (which emanated from the NY-LON axis) on Brexit and the future of ‘Anglo-America'.
Firm Beliefs and Long-Run Demand Effects in a Labor-Constrained Model of Growth and Distribution
AbstractOne of the most debated questions in alternative macroeconomics regards whether demand policies have permanent or merely transitory effects. While demand matters in the long run in (neo-) Kaleckian economics, both economists operating within other Keynesian traditions (e.g. Skott, 1989) as well as Classical economists argue that in the long-run output growth is constrained by an exogenous, ‘natural’ rate. This paper attempts to bridge the gap by analyzing the role of firm beliefs about the state of the economy in a labor-constrained growth and distribution model based on Kaldor (1956) and Goodwin (1967). The main innovation is the inclusion of beliefs about economic activity in an explicitly dynamic choice of capacity utilization at the firm level. We show that: (i) the relevance of such beliefs generates an inefficiently low utilization rate and labor share in equilibrium; but (ii) the efficient utilization rate can be implemented through fiscal policy. Under exogenous technical change, (iii) the inefficiency does not affect equilibrium employment and growth, but expansionary fiscal policy has positive level effects on both GDP and the labor share. Conversely, (iv) with an endogenous bias of technical change, fiscal policy will have not just level effects but also long-run effects on labor productivity growth and the employment rate. Finally, (v) the fact that the choice of utilization responds to income shares has a stabilizing effect on growth cycles, even under exogenous technical change, that is analogous to factor substitution.
- B5 - Current Heterodox Approaches