Wendy Carlin | University College London (original) (raw)

Papers by Wendy Carlin

Comparative Economic Studies, Jan 17, 2013

The early literature critical of the European Monetary Union feared the effects of asymmetric sho... more The early literature critical of the European Monetary Union feared the effects of asymmetric shocks on an area with little intercountry labor mobility and no common fiscal policy. Yet, asymmetric behavior, rather than asymmetric shocks, appears to be at the root of present difficulties. Peripheral countries have seen profligate public sectors incur large deficits and incautious private sectors incur large debts. In addition, wages in the Southern economies have grown more rapidly, and productivity more slowly, than in the North, storing up a medium-run competitiveness problem. Finally, governance standards, rather than converging, have diverged thus potentially jeopardizing the long-run aim of full political union. A plausible explanation for the failure of wage and governance behavior to converge is deep-seated differences in institutions, culture and trust. The potential for such crosscountry differences to undermine the success of the Eurozone was neglected in the early analysis of the common currency area.

Cambridge University Press eBooks, Apr 18, 1996

This paper uses a comparative and historical framework to evaluate the growth performance of the ... more This paper uses a comparative and historical framework to evaluate the growth performance of the West German economy from the beginning of the post-war period in 1945 to the reunification of Germany in 1990. Cross-country growth equations are used at the outset to provide a benchmark against which Germany's performance can be measured. Such equations suggest that German growth in

CESifo Economic Studies, Jun 30, 2012

In terms of macroeconomic performance, the Eurozone's first decade is a story of successful infla... more In terms of macroeconomic performance, the Eurozone's first decade is a story of successful inflation-targeting by the ECB for the common currency area as a whole combined with the persistence of real exchange rate and current account disequilibria at member country level. According to the standard New Keynesian (NK) model of a small member of a currency union, policy intervention at country level is not necessary to ensure adjustment to country-specific shocks. Self-stabilization of shocks takes place through the adjustment of prices and wages to ensure that the real exchange rate returns to equilibrium. That this did not happen in the Eurozone appears to be related to the presence of non-rational wage setters in a number of member countries. A related second departure from the NK model was the transmission of non-rational inflation expectations to the real interest rate, propagating easy credit conditions in countries with inflation above target. Problems of real exchange rate misalignment among members were exacerbated by the ability of Germany's wage-setting institutions to deliver self-stabilization. The implications for policy focus on using fiscal policy to target the real exchange rate and/or on reforms to labour markets that deliver real exchange rate oriented wage setting.

The Economic Journal, 2001

This paper investigates the relationship between export market shares and relative unit labour co... more This paper investigates the relationship between export market shares and relative unit labour costs using a long panel of twelve manufacturing industries across fourteen OECD countries. We ask two questions: (a) how sensitive are export market shares to changes in relative costs and (b) what determines the degree of sensitivity? Although both costs and embodied technology are important, we find that neither can fully explain changing export positions. We explore whether the residual country-specific trends might be linked to 'deep' structural features of economies such as human capital investment and national ownership patterns. On the second question, the sensitivity of exports to labour costs is lower in high tech industries and in core ERM countries. The industry elasticities have increased over time, especially in industries subject to increasing product market competition. We discuss the implications of these findings for European Monetary Union.

Journal of Financial Economics, Jul 1, 2003

This paper examines the relation between the institutional structures of advanced OECD countries ... more This paper examines the relation between the institutional structures of advanced OECD countries and the comparative growth and investment of 27 industries in those countries over the period 1970 to 1995. The paper reports a strong relation between the structure of countries' financial systems, the characteristics of industries, and the growth and investment of industries in different countries.

Edward Elgar Publishing eBooks, May 26, 1999

Despite massive regional policy efforts, GDP per capita in Southern Italy has only briefly conver... more Despite massive regional policy efforts, GDP per capita in Southern Italy has only briefly converged on Northern Italian levels (during the 1960s). Failure since then is associated with a policy switch from investment towards income maintenance, with reduced wage sensitivity to regional labour market conditions and with increases in rent-seeking opportunities and corruption. East Germany’s early experience of rapid wage

Oxford Review of Economic Policy, Nov 8, 2021

The climate emergency, rising inequality, and pandemic diffusion have raised the question: for wh... more The climate emergency, rising inequality, and pandemic diffusion have raised the question: for what purpose is capitalism fit? Implementing new policies and institutions to meet these challenges will require a realignment of political forces on a scale similar to that achieved by neoliberal policies and ideas over the past four decades. We suggest that a successful new paradigm must provide the basis of a dynamic and sustainable economy and be constituted by a synergistic set of ethical commitments, economic models, emblematic policies, and a new vernacular economics by which people understand and seek to improve their livelihoods and futures. We illustrate these four components by reference to the classical liberal, Keynesian-social democratic, and neoliberal paradigms. Using an expanded space for policies and institutions that integrates markets, states, and civil society, we propose elements of a new paradigm, including diminished space for capitalism and greater equality not only of economic endowments but also of dignity and voice.

German Politics, Dec 1, 1998

This paper identifies three different problems faced by the east German economy in the wake of re... more This paper identifies three different problems faced by the east German economy in the wake of reunification. The first is the problem of transition in which an effective state has to be established, and credible macroeconomic conditions, powerful market forces, a functioning banking system and effective corporate governance of enterprises introduced. It is argued that this set of problems was largely solved via unification. Yet unification brought with it a serious regional problem. Government policy has sought to deal with the regional problem by a programme of subsidising investment, but the costs imposed on the east by the transfer of the wage bargaining and social security systems remain. The heart of the east German economic problem lies with the successful transfer of some but not all west German institutions. The resulting institutional mismatch is likely to be difficult to resolve, with the consequence that a slow process of convergence of the east German economy to the level of output per capita of the west can be expected.

National Institute Economic Review, 2001

This paper examines two ways in which competition works in modern capitalist economies to improve... more This paper examines two ways in which competition works in modern capitalist economies to improve productivity. The first is through incentives: encouraging improvements in technology, organisation and effort on the part of existing establishments and firms. The second is through selection: replacing less-productive with more productive establishments and firms, whether smoothly via the transfer of market shares from less to more productive firms, or roughly through the exit of some firms and the entry of others. We report evidence from the UK suggesting that selection is responsible for a large proportion of aggregate productivity growth in manufacturing, and that much of this is due in turn to selection between plants belonging to multi-plant firms. We also investigate whether the nature of the selection process varies across the business cycle and report evidence suggesting that it is less effective in booms and recessions. Finally, although in principle productivity catch-up by low-income countries ought to be easier than innovation at the frontier, in the absence of a well functioning competitive infrastructure (a predicament that characterises many poor countries), selection may be associated with much more turbulence and a lower rate of productivity growth than in relatively prosperous societies. We report results of a survey of firms in transition economies suggesting that, particularly in the former Soviet states (excluding the Baltics), poor output and productivity performance has not been due to an unwillingness on the part of firms to change and adapt. On the contrary, there has been a great deal of restructuring, much new entry and large reallocations of output between firms; but such activity has been much more weakly associated with improved performance than we would expect in established market economies. 1 We should like to thank Matthew Barnes, Adina Claici, Laurence Constans, Reka Horvath and Philippe Sauvage for excellent research assistance, Irena Grosfeld for comments and our co-authors on other papers reported here for their very valuable help and advice. Wendy Carlin acknowledges support under PHARE ACE P97-8131-R. Jonathan Haskel thanks the Leverhulme Trust (grant F/07476A) for financial support. The UK data reported here has been prepared under contract to ONS as part of the ONS Business Data Linking Project. Thanks to Andrew Ross, Wendy Fader and staff at ONS for their help with the data. Errors and omissions remain our own. "The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates. … [This is a] process of industrial mutation-if I may use that biological term-that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism." (Capitalism, Socialism and Democracy 1943 (1976 edition, p. 83).

Oxford Review of Economic Policy, Jun 1, 1997

RePEc: Research Papers in Economics, Sep 1, 2010

RePEc: Research Papers in Economics, Oct 1, 2017

A major challenge is to build simple intuitive macroeconomic models for policy-makers and profess... more A major challenge is to build simple intuitive macroeconomic models for policy-makers and professional economists as well as students. A specific contemporary challenge is to account for the prolonged slow growth and stagnant productivity that has followed the post-financial crisis recession, along with low inflation despite low unemployment (notably in the UK). We set out a simple threeequation model, which extends the core model in our two recent books (Carlin and Soskice, 2006, 2015) to one with two equilibria and two associated macroeconomic policy regimes. One is the standard inflation-targeting policy regime with equilibrium associated with central bank inflation targeting through monetary policy. It is joined by a second, Keynesian policy regime and equilibrium, with a zero lower bound (ZLB) in the nominal interest rate and a ZLB in inflation in which only fiscal policy is effective (Ragot, 2015). Our approach is related to the Benigno and Fornaro (2016) Keynesian-Wicksellian model of growth with business cycles. It diverges from New Keynesian models because although we attribute model-consistent expectations to the policy-maker, we do not assume that these are the basis for inflation and growth expectations of workers and firms. We compare our approach to Ravn and Sterk's related multiple equilibrium New Keynesian model (Ravn and Sterk, 2016).

Social Science Research Network, May 1, 2016

Economic integration is generally thought to favour convergence in the economic performance of pr... more Economic integration is generally thought to favour convergence in the economic performance of previously separated regions; but this is far from universally true, as the experience of the members of the Eurozone testifies. The paper considers the two sharply contrasting cases of East and West German convergence following reunification and the enduring poverty of the Italian Mezzogiorno since Italian unification a century and a half ago. In both countries, political integration delivers much higher consumption in the lagging relative to the leading region than of per capita GDP. Consumption convergence can be supported by transfers but 'production' convergence ultimately requires catch-up in the production of tradeables. The paper demonstrates the radically different performance of the tradeable sector in the two cases, and suggests that this may be the result of differences in labour market flexibility, in investment performance and in the social norms required for the production of complex manufacturing. * The authors are grateful to Samuel Bowles and Nauro Campos for some very useful suggestions. They also thank participants at seminars at Brunel University, at the Santa Fe Institute and at ANU, as well as two anonymous referees and Daniel Berkovitz, the Journal's Editor, for comments that have clearly improved the paper.

RePEc: Research Papers in Economics, Mar 1, 1999

This paper provides new evidence on progress in transition and the progress toward 'readiness' fo... more This paper provides new evidence on progress in transition and the progress toward 'readiness' for accession that has been made by enterprises in two EU-applicant countries. A major innovation is the use of a market economy and member country of the EU-Spain-as a benchmark against which to measure such progress. A detailed survey was designed and administered to approximately 200 manufacturing firms in each of Poland, Romania and Spain. New private firms (firms established as private ab initio) in both Poland and Romania are found to be growing the fastest, but on measures of integration and investment, it is Polish ab initio private firms and privatised firms that look most similar to Spanish ones. Polish state-owned firms, and most Romanian enterprises, typically are less integrated. With respect to compliance with EU directives, Polish firms tend to lag behind Spanish ones but lie significantly ahead of those in Romania. Levels of awareness of and compliance with directives does not vary with ownership type amongst the Eastern European firms. Progress in transition at the country level seems to be consistent with improvements in compliance with the major components of the acquis communautaire. * Financial support for this study from the European Bank for Reconstruction and Development is gratefully acknowledged. We thank Savvas Kyriakides and Junior Davis for help in the preparation of the survey questionnaire and the participants at a workshop at the European Commission for their comments and suggestions. The usual caveat applies.

RePEc: Research Papers in Economics, May 1, 2001

This paper uses a survey of 3,300 firms in 25 transition countries to shed light on the factors t... more This paper uses a survey of 3,300 firms in 25 transition countries to shed light on the factors that influence restructuring by firms and their subsequent performance as measured by growth in sales and in sales per employee over a three-year period. We begin by surveying what a decade of transition has taught us about the factors that determine how firms respond to the new market environment. We go on to analyse the impact on performance of ownership, soft budget constraints, the general business environment and a range of measures of the intensity of competition as perceived by a firm. We find that competition has an important and non-monotonic effect on the growth of sales and of labour productivity: some degree of perceived market power is associated with higher sales growth, but competitive pressure is also important. Similar competition effects are found upon firms' decisions to develop and improve their products, but market power has an unambiguously negative impact on purely defensive (cost-reducing) restructuring activity. New firms have grown relatively fast, but among old firms ownership per se has no significant relationship to performance (though state-owned firms have engaged in significantly less development of new products). Soft budget constraints have a broadly negative and the business environment a broadly positive impact on restructuring and performance.

Dr Leonard Polonsky thesis digitisation, 1987

This study seeks to explain why the West German economy, one of the most successful industrialize... more This study seeks to explain why the West German economy, one of the most successful industrialized economies in the post-war period, exhibited a trend decline in the share and rate of profit. The contribution of three theories to the analysis of profitability is assessed. Neoclassical theory, especially the vintage production model, is used to analyse the adjustment of the structure of production to a slowdown in the growth rate of the labour force. Neo-Keynesian theory contributes by drawing attention to the authorities' aggregate demand management stance. The Kaleckian model focuses on the role of changes in oligopolistic price-setting behaviour and union bargaining power. This model is extended to an open economy and the effect on distribution of exchange rate changes is analyzed. Series for profit shares and rates are constructed from the German national accounts. Conceptual problems in relating accounting data to economic concepts of factor shares and rates of return are investigated. New measures of the "warranted" real wage increase are developed. An examination of the reconstruction of the German economy after 1945 shows how profitability was restored. Kornai's concept of "vegetative control" is used to throw new light on the functioning of the economy up to the Currency Reform. The subsequent pattern of development of the German economy is traced. Interpretations of trends in profitability in the course of policy discussions by the Bundesbank, government, Council of Economic Experts, unions and business associations are analyzed. A synthetic hypothesis is constructed to account for the pattern of manufacturing profitability. The explanatory role of labour shortage, growing openness, union bargaining power and exchange rate changes is confirmed. Set in the context of institutional and policy changes, these factors provide a more satisfying description of the determinants of profitability than previous, frequently monocausal, explanations.