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Macroeconomics by Daniele Tavani

Research paper thumbnail of Globalization as coordination failure: A Keynesian perspective

This paper presents an(other) investigation of the links between growth and distribution. We disc... more This paper presents an(other) investigation of the links between growth and distribution. We discuss a Neo–Kaleckian two country model with fixed mark–ups, where repercussions between the two countries matter. We assume that demand is wage–led in autarky but profit–led with trade, and study the effect of home country redistribution toward labor on aggregate demand in both countries. We derive closed form results for two identical countries, and run simulations to consider different economic structures (initial trade balance, relative country size, trade openness) and behavioral parameters (investment, savings and import elasticities). First, redistribution towards labor in one country always increases demand globally. Second, even with conservative parameterizations, the demand increase in the redistributing (appreciating) country can be positive, although the demand increase is definitely larger in the depreciating country. Therefore, third, globalization generates incentives for individual countries to suppress labor, which depresses global demand.

Research paper thumbnail of Redistribution in a neo-Kaleckian two country model

Mectroeconomica, 2014

We investigate the interaction between demand--driven growth and income distribution in open econ... more We investigate the interaction between demand--driven growth and income distribution in open economies, by combining expenditure--switching and demand spillover effects in a neo--Kaleckian two country model. First, we specify elasticities of wage share and real exchange rate to the money wage relative to labor productivity, in order to precisely describe the distributive pass--through from money wages to the labor share and the real exchange rate. Second, we analyze the demand effects of an increase in the money wage for given labor productivity (a redistribution toward labor) in both {\it Home} and {\it Foreign} country, as well as globally. We derive closed form results for two identical countries. These results indicate that redistribution towards labor at Home: (i) always increases growth globally if Home is wage--led, but can lead to lower growth at Home relative to Foreign; (ii) will always imply lower growth at Home relative to Foreign if Home is profit--led, but can still be growth--enhancing at Home. Thus, to the extent that countries are concerned with their relative economic performance, a fallacy of composition can emerge. Numerical simulations suggest that these fallacies could indeed occur. As a consequence, ``returns to coordination" over international labor policies might be substantial.

Papers by Daniele Tavani

Research paper thumbnail of Embedding care and unpaid work in macroeconomic modeling: A structuralist approach

Abstract This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care... more Abstract This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care work is formally modeled as a gendered input into the market production process via its impact on the current and future labor force, with altruistic motivations determining both how much support people give one another and the economic effectiveness of that support.

Research paper thumbnail of Le teorie economiche alternative e la crisi

Critica marxista: analisi e contributi per ripensare la …, 2011

... un'esternalità negativa in termini di aumento del ri-schio sistemico. ..... more ... un'esternalità negativa in termini di aumento del ri-schio sistemico. ... perversa di: elevata leva finanziaria delle banche d'investimento; complessità nel prezza-re i titoli derivati; bisogno di liquidità degli operato-ri, agisce come meccanismo amplificante di una crisi che, iniziata ...

Research paper thumbnail of Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)

Structural Change and Economic Dynamics, 2012

In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bar... more In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargainingà la Nash . As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy [14], and more recently Funk [10]). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States . Finally, institutional change, as captured by variations in workers' bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.

Research paper thumbnail of Public Capital, Redistribution and Growth in A Two-Class Economy

Research paper thumbnail of Endogenous technical change, employment and distribution in the Goodwin model of the growth cycle

Studies in Nonlinear Dynamics & Econometrics, 2014

In this paper, we introduce endogenous technological change through R&D expenditure on la... more In this paper, we introduce endogenous technological change through R&D expenditure on labor-augmenting innovation in the cyclical growth model by Goodwin (Goodwin, R. 1967. “A Growth Cycle.” In Socialism, Capitalism, and Economic Growth, edited by Carl Feinstein, Cambridge, UK: Cambridge University Press.). Innovation is a costly, forward-looking process financed out of profits, and pursued by owners of capital stock (capitalists) in order to foster labor productivity and save on labor requirements. Our main findings are: (i) Goodwin-type distributive cycles arise even with dynamic optimization, but (ii) endogenous technical change has a dampening effect on economic fluctuations; (iii) steady state per capita growth, income distribution and employment rate are endogenous, and depend on the capitalists’ discount rate, the institutional variables regulating the labor market, and policy variables such as subsidies to R&D activity. Implementing the model numerically to match long run data for the US, we show that: (iv) an increase in the capitalists’ discount rate lowers per-capita growth, the employment rate and the labor share; (v) an increase in workers’ bargaining strength moderately raises the labor share and moderately decreases per-capita growth, while sharply reducing employment: quarterly US fluctuations (1948–2006) in employment and the labor share seem to support this result; (vi) a balanced budget increase in the R&D subsidy also fosters per-capita growth at the expenses of the labor share, even though the corresponding variations might be small.

Research paper thumbnail of Bargaining over productivity and wages when technical change is induced: implications for growth, distribution, and employment

Journal of Economics, 2013

Abstract In a simple one-sector economy operating at full capacity, workers and firms bargain `a ... more Abstract In a simple one-sector economy operating at full capacity, workers and firms bargain `a la [Nash (1950)] over wages and productivity gains taking into account the trade-offs faced by firms in choosing factor-augmenting tech-nologies. The aggregate environment ...

Research paper thumbnail of Estimated non-linearities and multiple equilibria in a model of distributive-demand cycles

International Review of Applied Economics, 2011

... Estimated non-linearities and multiple equilibria in a model of distributive-demand cyclesDan... more ... Estimated non-linearities and multiple equilibria in a model of distributive-demand cyclesDaniele Tavani a, *, Peter Flaschel b and Lance Taylor c ... Corresponding author. Email:daniele.tavani@colostate.edu Page 2. 2 D. Tavani et al. ...

Research paper thumbnail of Embedding Care and Unpaid Work in Macroeconomic Modeling: A Structuralist Approach

Feminist Economics, 2011

This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care work is ... more This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care work is formally modeled as a gendered input into the market production process via its impact on the current and future labor force, with altruistic motivations determining both how much support people give one another and the economic effectiveness of that support. This study uses the model to distinguish between two types of economies-a "selfish" versus an "altruistic" economyand seeks to understand how different macroeconomic conditions and events play out in the two cases. Whether and how women and men share the financial and time costs of care condition the results of the comparison, with more equal sharing of care responsibilities making the "altruistic" case more likely.

Research paper thumbnail of Demand Driven Goodwin Growth Cycles with a Three-Regimes Wage Phillips Curve

We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplifie... more We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplified version of the model by Flaschel and Krolzig (2006). The resulting non-linearity in the wage inflation-employment relation translates into a non-linearity in the reduced form of the ...

Research paper thumbnail of A structuralist model of the wage-price spiral with non-linear demand pressure terms

We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplifie... more We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplified version of the model by Flaschel and Krolzig (2006). The resulting non-linearity in the wage inflation-employment relation translates into a non-linearity in the reduced form of the ...

Research paper thumbnail of Globalization as coordination failure: A Keynesian perspective

This paper presents an(other) investigation of the links between growth and distribution. We disc... more This paper presents an(other) investigation of the links between growth and distribution. We discuss a Neo–Kaleckian two country model with fixed mark–ups, where repercussions between the two countries matter. We assume that demand is wage–led in autarky but profit–led with trade, and study the effect of home country redistribution toward labor on aggregate demand in both countries. We derive closed form results for two identical countries, and run simulations to consider different economic structures (initial trade balance, relative country size, trade openness) and behavioral parameters (investment, savings and import elasticities). First, redistribution towards labor in one country always increases demand globally. Second, even with conservative parameterizations, the demand increase in the redistributing (appreciating) country can be positive, although the demand increase is definitely larger in the depreciating country. Therefore, third, globalization generates incentives for individual countries to suppress labor, which depresses global demand.

Research paper thumbnail of Redistribution in a neo-Kaleckian two country model

Mectroeconomica, 2014

We investigate the interaction between demand--driven growth and income distribution in open econ... more We investigate the interaction between demand--driven growth and income distribution in open economies, by combining expenditure--switching and demand spillover effects in a neo--Kaleckian two country model. First, we specify elasticities of wage share and real exchange rate to the money wage relative to labor productivity, in order to precisely describe the distributive pass--through from money wages to the labor share and the real exchange rate. Second, we analyze the demand effects of an increase in the money wage for given labor productivity (a redistribution toward labor) in both {\it Home} and {\it Foreign} country, as well as globally. We derive closed form results for two identical countries. These results indicate that redistribution towards labor at Home: (i) always increases growth globally if Home is wage--led, but can lead to lower growth at Home relative to Foreign; (ii) will always imply lower growth at Home relative to Foreign if Home is profit--led, but can still be growth--enhancing at Home. Thus, to the extent that countries are concerned with their relative economic performance, a fallacy of composition can emerge. Numerical simulations suggest that these fallacies could indeed occur. As a consequence, ``returns to coordination" over international labor policies might be substantial.

Research paper thumbnail of Embedding care and unpaid work in macroeconomic modeling: A structuralist approach

Abstract This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care... more Abstract This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care work is formally modeled as a gendered input into the market production process via its impact on the current and future labor force, with altruistic motivations determining both how much support people give one another and the economic effectiveness of that support.

Research paper thumbnail of Le teorie economiche alternative e la crisi

Critica marxista: analisi e contributi per ripensare la …, 2011

... un'esternalità negativa in termini di aumento del ri-schio sistemico. ..... more ... un'esternalità negativa in termini di aumento del ri-schio sistemico. ... perversa di: elevata leva finanziaria delle banche d'investimento; complessità nel prezza-re i titoli derivati; bisogno di liquidità degli operato-ri, agisce come meccanismo amplificante di una crisi che, iniziata ...

Research paper thumbnail of Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)

Structural Change and Economic Dynamics, 2012

In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bar... more In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargainingà la Nash . As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy [14], and more recently Funk [10]). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States . Finally, institutional change, as captured by variations in workers' bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.

Research paper thumbnail of Public Capital, Redistribution and Growth in A Two-Class Economy

Research paper thumbnail of Endogenous technical change, employment and distribution in the Goodwin model of the growth cycle

Studies in Nonlinear Dynamics & Econometrics, 2014

In this paper, we introduce endogenous technological change through R&D expenditure on la... more In this paper, we introduce endogenous technological change through R&D expenditure on labor-augmenting innovation in the cyclical growth model by Goodwin (Goodwin, R. 1967. “A Growth Cycle.” In Socialism, Capitalism, and Economic Growth, edited by Carl Feinstein, Cambridge, UK: Cambridge University Press.). Innovation is a costly, forward-looking process financed out of profits, and pursued by owners of capital stock (capitalists) in order to foster labor productivity and save on labor requirements. Our main findings are: (i) Goodwin-type distributive cycles arise even with dynamic optimization, but (ii) endogenous technical change has a dampening effect on economic fluctuations; (iii) steady state per capita growth, income distribution and employment rate are endogenous, and depend on the capitalists’ discount rate, the institutional variables regulating the labor market, and policy variables such as subsidies to R&D activity. Implementing the model numerically to match long run data for the US, we show that: (iv) an increase in the capitalists’ discount rate lowers per-capita growth, the employment rate and the labor share; (v) an increase in workers’ bargaining strength moderately raises the labor share and moderately decreases per-capita growth, while sharply reducing employment: quarterly US fluctuations (1948–2006) in employment and the labor share seem to support this result; (vi) a balanced budget increase in the R&D subsidy also fosters per-capita growth at the expenses of the labor share, even though the corresponding variations might be small.

Research paper thumbnail of Bargaining over productivity and wages when technical change is induced: implications for growth, distribution, and employment

Journal of Economics, 2013

Abstract In a simple one-sector economy operating at full capacity, workers and firms bargain `a ... more Abstract In a simple one-sector economy operating at full capacity, workers and firms bargain `a la [Nash (1950)] over wages and productivity gains taking into account the trade-offs faced by firms in choosing factor-augmenting tech-nologies. The aggregate environment ...

Research paper thumbnail of Estimated non-linearities and multiple equilibria in a model of distributive-demand cycles

International Review of Applied Economics, 2011

... Estimated non-linearities and multiple equilibria in a model of distributive-demand cyclesDan... more ... Estimated non-linearities and multiple equilibria in a model of distributive-demand cyclesDaniele Tavani a, *, Peter Flaschel b and Lance Taylor c ... Corresponding author. Email:daniele.tavani@colostate.edu Page 2. 2 D. Tavani et al. ...

Research paper thumbnail of Embedding Care and Unpaid Work in Macroeconomic Modeling: A Structuralist Approach

Feminist Economics, 2011

This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care work is ... more This study embeds paid and unpaid care work in a structuralist macroeconomic model. Care work is formally modeled as a gendered input into the market production process via its impact on the current and future labor force, with altruistic motivations determining both how much support people give one another and the economic effectiveness of that support. This study uses the model to distinguish between two types of economies-a "selfish" versus an "altruistic" economyand seeks to understand how different macroeconomic conditions and events play out in the two cases. Whether and how women and men share the financial and time costs of care condition the results of the comparison, with more equal sharing of care responsibilities making the "altruistic" case more likely.

Research paper thumbnail of Demand Driven Goodwin Growth Cycles with a Three-Regimes Wage Phillips Curve

We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplifie... more We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplified version of the model by Flaschel and Krolzig (2006). The resulting non-linearity in the wage inflation-employment relation translates into a non-linearity in the reduced form of the ...

Research paper thumbnail of A structuralist model of the wage-price spiral with non-linear demand pressure terms

We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplifie... more We introduce the results of a non-parametric estimate of the wage-Phillips Curve into a simplified version of the model by Flaschel and Krolzig (2006). The resulting non-linearity in the wage inflation-employment relation translates into a non-linearity in the reduced form of the ...