Rudiger von Arnim | University of Utah (original) (raw)

Macroeconomics by Rudiger von Arnim

Goodwin’s original endogenous growth cycle describes a supply-driven counter-clockwise movement i... more Goodwin’s original endogenous growth cycle describes a supply-driven counter-clockwise movement in employment rate and labor share (Goodwin 1967). Such cycles are observed
in (US) data. Similarly, counter-clockwise cycles exist between utilization rate and labor share, and utilization rate and employment rate. This paper presents a critical discussion
of two demand-driven frameworks to explain these cycles, namely a Goodwin–Kaldor model and a Goodwin–Kalecki model. The two models share important features. The main difference lies in the approach to the determination of the distribution of income. We argue that the Goodwin–Kalecki model’s ‘profit squeeze’ is the preferable approach.

However, we seem to agree on the main issue: that one should carefully consider an agent's motiva... more However, we seem to agree on the main issue: that one should carefully consider an agent's motivation and purposeful action. We do that; but argue that the equations are best interpreted as the outcome of the interaction of a multitude of agents. Consideration of microeconomic foundations and modeling of macroeconomic aggregates are not mutually exclusive. 2. See the discussion related to our equation , as well as Skott's footnote 10 in his reply. Note that equations (3)-(4) in his reply imply instability; we discuss this specification of investment in relation to equations (11)-(12) in our paper.

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.

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.

Abstract This paper puts forth a Neo-Kaleckian open economy model of two countries in order to in... more Abstract This paper puts forth a Neo-Kaleckian open economy model of two countries in order to investigate adjustment of US-China external imbalances. First, a stylized fixed mark-up model is presented, and discussed based on graphical analysis. Second, we present estimates of bilateral income and price elasticities of imports. Third, we employ the model for simulation analysis.

Abstract This paper presents an investigation of global recovery from the Great Recession and the... more Abstract This paper presents an investigation of global recovery from the Great Recession and the rebalancing of global external imbalances, using a global model of 16 countries and composite regions. The model applies to the short term and only to the real side. Key features are demand-driven output determination, pro-cyclical aggregate labour productivity, imperfect competition in product markets and simple bargaining in non-clearing labour markets, which together determine the functional distribution of income.

This paper discusses a Post-Keynesian model of income, production and trade. The one-country, one... more This paper discusses a Post-Keynesian model of income, production and trade. The one-country, one-sector model features Kaleckian investment demand, Kaldorian productivity and a labor market module based on a wage–price spiral. The model is first presented for a closed economy with exogenous real wages; second, for a closed economy with endogenous real wages; third, for an economy open to trade with endogenous real wages. Simulations with different calibrations show key characteristics of the model. Monte Carlo simulations over reasonable parameter ranges shed some light on the effectiveness of wage policies in open economies.

This paper assesses how the current housing and credit crisis will impact US real activity, and h... more This paper assesses how the current housing and credit crisis will impact US real activity, and how recession interacts with adjustment of global imbalances. A simple real-side model with decreasing returns to factors and non-clearing goods and labor markets is disaggregated into traded and non-traded sectors and three regions (US, EU and Asia). A three region model offers two degrees of freedom and six candidate variables for endogeneity in international accounts. Applying standard income and elasticities approaches as well as a less standard “Bretton Woods II” closure in simulations suggests external imbalances can be reduced in the current recession with a mix of fiscal expansion and some Asian real appreciation.

Development, trade and CGE by Rudiger von Arnim

This article presents a model of a developing economy with three sectors—industry, agriculture an... more This article presents a model of a developing economy with three sectors—industry, agriculture and energy. Industry and energy are assumed to be demand-constrained, but agriculture supply-constrained. The model highlights: (a) structural transformation, through labour transfer from agriculture to industry; (b) inflation, driven by the interaction of demand and the supply constraint in agriculture; and (c) the link between energy use and labour productivity. Employing a Kaldor-Verdoorn productivity rule in industry augmented with energy intensity—energy per unit of labour—as an argument, we emphasize that labour productivity growth is driven by energy intensity rather than energy productivity growth. As a consequence, emissions reduction without North–South technology transfer and financial assistance costs growth.

Almost a decade has passed since developing countries' delegates walked from the negotiating tabl... more Almost a decade has passed since developing countries' delegates walked from the negotiating tables and protesters took to the streets in Seattle 1999, as they saw their interests and concerns at best neglected and at worst undermined.

As in the case of other developing regions, when most Arab countries became independent in the 19... more As in the case of other developing regions, when most Arab countries became independent in the 1960s the dominant approach to effecting development in developing countries was informed by the basic ideas and concepts proposed by development economists of the 1940s and 1950s. These ideas and concepts were based on visionary development strategies that aimed at effecting structural transformation with a central role assigned to the government in planning and programming such a process.

This paper critically reviews the impact of globalization on Sub-Saharan Africa (SSA) since the e... more This paper critically reviews the impact of globalization on Sub-Saharan Africa (SSA) since the early 1980s. The large gains expected from opening up to international economic forces have, to date, been limited, and there have been significant adverse consequences. FDI in SSA has been largely confined to resource, especially mineral, extraction, even as continuing capital flight has reduced financial resources available for productive investments. Premature trade liberalization has further undermined prospects for SSA economic development as productive capacities in many sectors are not sufficiently competitive to take advantage of any improvements in market access.

Paul Krugman’s contribution in the development of “new” trade theory pushed the profession beyond... more Paul Krugman’s contribution in the development of “new” trade theory pushed the profession beyond the overly simplistic assumption of perfect competition. Since then, new trade theory has tended to be integrated and reconciled with traditional trade theory, undermining its deployment in support of successful strategic trade policy intervention.

A number of models – developed in particular in the World Bank – show large gains for developing ... more A number of models – developed in particular in the World Bank – show large gains for developing countries through trade liberalisation at the World Trade Organisation. These models are, however, not just simplistic, they also suffer from a number of fundamental flaws. The actual gains are far smaller for developing countries and far greater for the rich countries. The models ignore the risks of displacement, economic downturns and rising debt.

The World Trade Organization's Doha Round of multilateral trade negotiations, named because it or... more The World Trade Organization's Doha Round of multilateral trade negotiations, named because it originated in the capital of Qatar, has collapsed as of this writing. Negotiators have been unable to reach agreement in the face of repeatedly missed deadlines. Despite this stalemate, many believe that negotiations may be revived.

How can the effects on economic performance and well-being of nations from trade liberalization b... more How can the effects on economic performance and well-being of nations from trade liberalization be estimated? Part I of this paper is a non-technical review and critique of the most widely used technique based on Computable General Equilibrium (or CGE) models. Part II goes over much the same material at a more technical level. Part III presents simulations with a simplified numerical model which are used to underline the main points. Conclusions appear in Part IV. An appendix describes the model in algebra.

Mectroeconomica, 2014

The paper presents a review and critique of the most widely used trade models based on computable... more The paper presents a review and critique of the most widely used trade models based on computable general equilibrium (or CGE) models. The emphasis throughout is on methodology. The paper provides concise analytical arguments explaining the
fundamental weaknesses of CGE models, paying particular attention to the way that CGE models conceptualise and masure welfare. The authors also show that the manner in which the World Bank uses CGE modelling is highly problematic, making implausible assumptions about elasticities, the exchange rate, and macro causality. World Bank models assume that the most central macro-economic indicators do not change in response to any liberalisation scenario. The authors argue that this is negligent, especially in developing countries with historically large trade deficits, significant debt problems, and a large informal economy with underemployment in modern sectors. The authors also identify a particular inconsistency inherent in the use of ‘Armington’ specifications of elasticities in CGE models. They show that, even if the Bank’s welfare measures and macro causal scheme are accepted, the welfare gains that liberalisation is supposed to induce are estimated incorrectly in LINKAGE, GTAP, and other trade models that adopt the popular Armington specification of imperfect competition between trading partners.

*William Milberg is Associate Professor of Economics at The New School for Social Research and a ... more *William Milberg is Associate Professor of Economics at The New School for Social Research and a Faculty Research Fellow at the Schwartz Center for Economic Policy Analysis. Melissa Mahoney, Markus Schneider, and Rudi von Arnim are Research Associates at the Schwartz Center for Economic Policy Analysis. Correspondence for the authors can be sent to MilbergW@newschool.edu.

Review of Radical Political Economics, 2020

This paper contributes to the literature on secular stagnation by estimating a measure of potenti... more This paper contributes to the literature on secular stagnation by estimating a measure of potential output growth for the post-war US economy derived from a novel model specification that allows for the cyclical interactions between income distribution, represented by the trajectory of the labor share of income, and economic activity, as measured by capacity utilization. The results obtained show that potential output growth exhibits a gradual decline that predates the Great Recession and follows the downward trajectory of the labor share of income, thus suggesting the existence of an important long-run relationship between income distribution and output growth in the United States.

Journal of Policy Modeling, 2018

Review of Keynesian Economics, 2015

ABSTRACT

Good Growth and Governance in AfricaRethinking Development Strategies, 2011

Structural Change and Economic Dynamics, 2012

This paper explores macroeconomic policies that can sustain structural change in China and India.... more This paper explores macroeconomic policies that can sustain structural change in China and India. A two-sector open-economy model with endogenous productivity growth, demand driven output and income distribution as an important determinant of economic activity is calibrated to a 2000 SAM for China and a 1999/2000 SAM for India. Short-run analysis concerns temporary equilibria for output, productivity and employment growth rates in the formal sector. In the long-run, the model allows for multiple equilibria which can describe cases of (a) underdevelopment and structural heterogeneity or (b) sustained growth and development. Several simulation exercises are conducted. Specifically, we consider how changes in investment, wages, labor productivity trend and a depreciation of currency affect the macroeconomy and job creation in the formal sector.

Metroeconomica, 2014

ABSTRACT We investigate the interaction between demand-driven growth and income distribution in o... more ABSTRACT 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 towards labor) in both Home and 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; and (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.

Journal of Policy Modeling, 2009

This paper assesses how the current housing and credit crisis will impact US real activity, and h... more This paper assesses how the current housing and credit crisis will impact US real activity, and how recession interacts with adjustment of global imbalances. A simple real-side model with decreasing returns to factors and non-clearing goods and labor markets is disaggregated into traded and non-traded sectors and three regions (US, EU and Asia). A three region model offers two degrees of freedom and six candidate variables for endogeneity in international accounts. Applying standard income and elasticities approaches as well as a less standard "Bretton Woods II" closure in simulations suggests external imbalances can be reduced in the current recession with a mix of fiscal expansion and some Asian real appreciation.

International Review of Applied Economics, 2013

This paper puts forth a Neo-Kaleckian open economy model of two countries in order to investigate... more This paper puts forth a Neo-Kaleckian open economy model of two countries in order to investigate adjustment of US-China external imbalances. First, a stylized fixed markup model is presented, and discussed based on graphical analysis. Second, we present estimates of bilateral income and price elasticities of imports. Third, we employ the model for simulation analysis. Specifically, we randomly distribute expenditure change across government, investment and imports and calculate the exchange rate change necessary to lead to an equal change in the bilateral external imbalance. Doing so repeatedly allows to estimate probability distributions of endogenous variable changes.

Development and Change, 2011

Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.

Cambridge Journal of Economics, 2012

This paper presents an investigation of global recovery from the Great Recession and the rebalanc... more This paper presents an investigation of global recovery from the Great Recession and the rebalancing of global external imbalances, using a global model of 16 countries and composite regions. The model applies to the short term and only to the real side. Key features are demand-driven output determination, pro-cyclical aggregate labour productivity, imperfect competition in product markets and simple bargaining in non-clearing labour markets, which together determine the functional distribution of income. Trade is modelled in a bilateral import matrix; particular attention is paid to international adjustment. Simulation results suggest that early exit from fiscal support threatens a fragile recovery. Further, domestic demand expansion and revaluation in real terms in surplus countries are necessary for rebalancing, and a variety of measures can be employed to achieve these goals.

The explosion over the past ten years of US imports of information technology (IT) and IT-enabled... more The explosion over the past ten years of US imports of information technology (IT) and IT-enabled services has been a clear boon to the economies of India, China, Singapore, the Philippines and a number of other developing countries. But there is a considerable debate about the welfare effects of offshoring for the US International trade economists generally agree that in the short run the surge in offshoring has brought efficiency gains, but has not been beneficial to US welfare overall because of inadequate assistance to displaced ...

New York: Schwartz Center for Economic Policy Analysis, New School for Social Research (Policy note), 2006

This hard-hitting research report presents a rigorous critique of the most widely used trade mode... more This hard-hitting research report presents a rigorous critique of the most widely used trade models based on computable general equilibrium (or CGE) models. The authors present concise analytical arguments explaining the fundamental weaknesses of typical CGE models. They show that these models tend to make unrealistic assumptions about the macro-economy and do not allow an accurate estimation of the welfare gains that trade liberalisation is supposed to induce. The report appeals for honest simulation strategies ...

SSRN Electronic Journal, 2021

This paper provides a theoretical and empirical reassessment of supermultiplier theory. First, we... more This paper provides a theoretical and empirical reassessment of supermultiplier theory. First, we show that, as a result of the passive role it assigns to investment, the Sraffian supermultiplier (SSM) predicts that the rate of utilization leads the investment share in a dampened cycle or, equivalently, that a convergent cyclical motion in the utilization-investment share plane would be counterclockwise. Second, impulse response functions from standard recursive vector autoregressions (VAR) for postwar US samples strongly indicate that the investment share leads the rate of utilization, or that these cycles are clockwise. These results raise questions about the key mechanism underlying supermultiplier theory.