PSL Quarterly Review

Workers or rentiers

2022-11-22T14:33:04+00:00

We explore the shifting allegiances in the traditional conflict between capital and labor. This shift is created by finance: the distinction between financial and nonfinancial firms has become elusive. Our focus is on the worker who voluntarily or involuntarily transforms into a rentier. We embed the choices of capital and labor in state-space representations of a general macro model: one state equation is the accumulation of wealth, the other is the accumulation of capital. The ‘euthanasia of the rentier’ and the pick of the capital accumulation regime is determined by government choice of the interest rate.

Unit labor costs and inflation in the OECD countries

2023-10-06T17:35:33+00:00

This paper investigates the drivers of inflation in 34 Organization for Economic Cooperation and Development countries from the first quarter of 2020 to the fourth quarter of 2022. Using an amplified price equation and two different panel data econometric techniques, we assess the impact of seven key variables on the price level. In this context, unit labor costs are a major source of price instability, whereas massive cash transfers generate demand-pull inflation. Moreover, higher financial costs are potentially inflationary, debt/contract relief policies are deflationary, and pandemic-related variables deliver mixed effects on prices. These findings have clear-cut policy implications.

The endogenous money hypothesis: empirical evidence from Türkiye (2008-2020)

2023-05-26T16:36:34+00:00

This paper examines the validity of the endogenous money supply hypothesis in Türkiye from 2008 to 2020. The endogenous money hypothesis underlines the fact that a demand for bank credit leads to the creation of credit and deposit. Deposits are created once credit application is approved by banks. Therefore, the money supply is endogenously determined by bank loans. However, there exist horizontalist, structuralist, and circuitist views, each proposing different causalities between monetary aggregates and the relationship between money and income. In this article, we put forth ten hypotheses to test the validity of the endogenous money hypothesis and three main perspectives over the period 2008-2020 in Türkiye. We aim to discern which of the three main views aligns best with the sample. Our findings provide new evidence on the validity of the endogenous money hypothesis in Türkiye from 2008 to 2020. Besides, the circuit theory of money fits precisely in the short run but partially in the long run. The findings also support the structuralist view partially according to the long-run results.

A global race to the bottom: The neo-Goodwinian aggregative-systems estimation of income distribution and capacity utilization interactions

2023-10-06T16:03:39+00:00

The neoliberal reforms since the 1980s have resulted in rapid globalization paralleled by worsening income distribution. In this paper, I first show that most countries worldwide (58 of 81) have experienced a decline in the labor share of income, or the wage share, during 1950-2019. Second, I estimate the demand and distributive regimes from 81-country panel data based on the neo-Goodwinian model. At the global level, the short-run estimation shows that the distributive regime appears to be Marxian/profit-squeeze and the demand regime exhibits profit-led. I further separate the estimation into two groups: advanced and developing countries. The estimation still confirms the profit-led/profit-squeeze regimes in both groups, even though the demand and distributive regimes are stronger in advanced economies. In the long run, the results reveal a global race to the bottom: a decline in the long-run wage share. Neither positive nor negative gain is founded on capacity utilization in advanced and developing countries.

A micro-founded Kaldor-Pasinetti model considering an open economy

2023-08-01T13:33:07+00:00

This paper expands Baranzini’s (1991) approach by introducing the assumption of an open economy to a model of capital accumulation in an intergenerational framework. Our results show the importance of government activity and foreign trade interrelations in determining the path of the income distribution and growth processes. Government revenue derives from inheritance taxation, which is used as income transfers. Exports affect capital accumulation negatively, and the inverse result for imports is true. Moreover, the government does not have to incentivize exports; otherwise, capital accumulation will be harmed. Thus, both assumptions influence the determination of the income distribution and growth processes.