Post on 12-Jan-2016
transcript
MACRO
WS 2002/03
KEYNES
• Keynes: uncertainty• Keynes: do flexible wages help?• Keynes: inflation (prices)• Summing up: Classicals and Keynes
• Neoclassical labor market• deriving labor demand• How is unemployment possible?
NAIRU
• Non-accelerating inflation rate of unemployment
• Bargained Real Wage Curve vs. Labor Supply Curve
• Price Setting curve (vs. Labor demand curve)
• Notion of Equilibrium
NAIRU, 2/2
• Full model
• Assumptions about AD(p)
• Policy conclusions
BRW
• W = w0 + w1*U + PE
• Curve depicts bargaing equilibria
• What will shift the curve?
• What effects labor‘s bargaining position
• LABOR SUPPLY
• individual optimizing decision
Price setting curve
• P = m + MPL + WE
• price setting in imperfect competition
NAIRU - Equilibrium ?!
• Is there unemployment at the NAIRU?- Yes
• Is there involuntary unemployment at the NAIRU? -- YES!!!
• What happens if unemployment is less than the NAIRU? -- inflation accelerates
• Why should actual U return to the NAIRU?
A NAIRU model
• Wage setting: W = w0 + w1*U + PE
• Price setting: P = m + MPL + WE
• Demand: AD = a0 + a1*P
• Employment: U = f(AD)
Effects of inflation
• Why should demand (AD) fall if inflation rises?
• Money supply effect (Keynes effect)
• Real wealth effect (Pigou effect)
• but: Fisher effect
• central bank policy (?)
Policy conclusions
• To affect NAIRU: weaken bargaing position of labor
• unemployment benefits, labor market regulations ...
• Is the NAIRU theory Keynesian? Yes and No!
KALDOR (1908-86)
• part of Cambridge Circle around Keynes
• One of the major post-Keynesian economists after WW II
• growth theory
• distribution
• cumulative causation
• worked as economic advisor
Kaldor (1955/56)
• Foundation of Post-Keynesian theory of distribution
• effective demand in the short run: determines output
• effective demand in the long run: determines income distribution
4 theories
• Ricardo
• Marx
• Neo-Classical/Marginalist
• ‚Keynes‘
Ricardo
• Class theory of distribution
• 3 classes: workers, capitalists, landlords
• wage fixed by subsistance level
• diminishing returns only in agriculture: rent determined by MP of land
• profits: residue after rents and wages (surplus principle)
• rents will rise -> stagnation
Marx
• All value created by labor (labor theory of value)
• conventional/subsistance wage because of ‚industrial reserve army‘
• surplus gets distributed between profits and rents
• profits are reinvested (competition)• profit rate will fall due to tech. reasons
Marginalists/Neo-Classical
• General substitutability (not Ricardo!)
• w=MPL; r=MPK=dY/dK
• (Kaldor:) what is the meaning of ‚capital‘? (capital controversy)
• How do you know the value of capital without knowing income distribution?
• Distribution as special case of price theory
‚Keynes‘/Kaldor
• Effective demand: multiplier (I S)
• in the short run: investment determines output (and employment)
• in the long run: full employment (by assumption)
• long run: investment determines income distribution!
‚Keynes‘/Kaldor 2/2
• Different saving propensities between profit (sR) and wage income (sw): sR > sw
• for simplicity assume sw = 0
• then S= sR.R
• then I = sR.R
• macroeconomic theory of income distribution
Exercise
• Y=C+I
• I=I0
• S= sR.R (= assume that sw=0)
• note that R=Y-wN=Y-w/LP.Y (N=Y/LP)
• solve for Y* by S=I
• LONG RUN: interpret Y*=... , if Y is fixed. What can determine what?
Solow model (1956)
• Standard neoclassical growth model
• Production function• savings function• steady state
• What about the labor market?• What happened to I=S ?
Exercise 1 (labor share)
• What is the ‚wage share‘ (wL/Y) in a neoclassical world with a Cobb Douglas production function?
• Hint: take the profit maximising employment level and solve the expression for wL/Y
Exercise 2 (steady state)
• Derive the equilibrium growth rate in a Solow model?
• Take production function (with k=K/L)
• and savings function
• What has to hold in equilibrium? dk/dt=0 !
• What is the equilibrium k ?
Exercise 3 (comp. statics)
• What happens in the Solow model if the savings rate increases?
• What happens in population growth increases?
Solow model with tech. progress
• Labor augmenting tech change (g)
• express k in terms of ‚effective‘ labor units
• in the steady state: gY = g
Solow model: summary
• Simple neoclassical growth model
• assumes full employment
• production and savings function
• k grows with population and exogenous technical change
• income distribution does not matter
Endogenous growth theory
• What is endogenous? Tech progress
• builds on neo-classical (Solow) growth model
• increasing returns model because of endogenous tech progress
Ideas
• Technology: how inputs are transformed into outputs
• Ideas/knowledge improve technology
• Ideas are non-rivalrous increasing returns to scale imperfect competition
• Are ideas public goods? (excludability?)
Technological progress
• Tech progress depends on research effort: A=A .LA
• = productivity of R&D time researchers
• Exercise: what is balance growth?
• gA=constant
Other EGT's
• Externalities from capital stock
• 'learning by doing'
• Schumpeterian growth
Optimal R&D?
• Remember: ideas externalities
• market solution will not be optimal. Why?
• Researcher looks at his own benefit, not the one to society (ignores knowledge spill-overs).
• ‚stepping on toes‘
• consumer surplus (imperfect competition!)
Solow and EGT
• exogenous vs. endogenous growth economy grows in equi (in EGT)
• perfect vs imperfect competition
• convergence vs. divergence
• driving forces are the same: technology and preferences
• How useful is this discription of tech progress?
• Stationary state• perfect competition• convergence of
countries
• Endogenous growth• imperfect competition• divergence possible
What is neo-classical econ?
• Methodlogical individualism (profit and utility max) ?
• Market clearing?
• Assertion that markets lead to optimal results ("invisible hand") ?
Growth, distribution and employment: An ountline
6E n og e no u s g ro w th
5S o lo w m o d e l
n e o -c lass ica l g ro w th
2n e o -c lass ica l la b o r m a rke t
3N A IR U
7R o b in son
P o s t-K e yn es ia n g ro w th
7K a le cki
P o s t-K e yn es ia n g ro w th
8B o yer
R e g u la tion the o ry
4K a ld or
1K e yn e s vs. C la ss ics
Post-Keynesian Growth
• Principle of effective demand in LR
• income distribution
• conventional, not rational behavior
• "historical time"
• investment as driving force
• non-clearing labor market in the LR
Investment
• Investement (I) - accumulation (I/K)
• investment = long term commitment
• (fundamental) uncertainty about the future
• conventions to deal with uncertainty
• conventions -- institutions
• expected profits! -> I=I(R)
• "animal spirits" (exog. Inv.)
Short run
• Inv exog
• Sav sR>sW
• Distr exog
• Exercise1: solve for Y*
• I=I0
• S= sW W+ sR R= sW(1-)Y+ sR Y• Discuss the multiplier
Robinsonian growth
• Assumes full capacity utilization
• accumulation depends on profits demand determines distr! (Kaldor)
• Exercise 2
• accu: I/K=gI(r)= g0+g1r
• savings: S/K= gS(r)=sr
Kaleckian growth
• Variable capacity utilization
• why? Imperfect competition
• exogenous income distribution
• why? Mark-up pricing (imperf. comp)
• power relations between capital and labor
• endogenizing distribution?
Exercise 3
• Note: r= z=(R/Y)(Y/K)
• Distr =0
• Accu gI=g0+g1 +g2z
• Sav gS=s z• What is equilibrium growth?
• What does demand-led growth mean?
PK growth: comparison
SR Robinson Kalecki
Inv exog gI(r) gI(,z)
Saving S(Y) gS(r) gS(,z)
distr exog endog exog.
PK growth
• Key variables: accumulation and distribution
• Robinson vs. Kaleckian model: fixed vs. flexible capacity utilization
• flex cap.util. -- exog. distribution
• How long is the long run?
Neo-classical vs. PK
• Main driving forces:• technology
(substitution)• preferences• rational individuals• full employment
• Main driving forces:• investment (animal
spirits)• distributional conflict• classes• non-clearing labor
market
Theory of régulation
• Developed in 70s and 80s
• combining economic and institutional analysis
• régulation = self-regulation of a system
• the system is a system of institutions
• ... that shapes the behaviour of actors
Institutions
• Institutions, not markets, provide stability
• institutions are outcome of political struggles and compromise
• institutions shape behaviour
Crises and régulation
• 2 types of crises: small (business cycles) and big (structural)
• structural crises = crises of mode of regualtion (+accu regime); similar to long waves
• examples for structural crises: 1930s, 1970s
Mode of regulation
• Composed of the following "institutional forms":
• wage and labor nexus (wages, work org.)
• monetary regime (what is money?)
• competitive relations
• forms of state interventions
• international regime
Regime of accumulation
• Describes macroeconomic system
• income distribution and demand formation
• sectoral balance
• macro ec. development has to be complementary and is determined by institutional setting
Exercise
• Try to make an overview table and describe:
• 3 periods: pre-30s; 1945-70s; 1980-now
• 5 structural forms
Competitive vs. Monopolist R.
• Decentralized wage contracts cyclical wages
• small competing firms
• gold standard• British hegemony
• minimal state
• Collective bargaining stable wages
• large corporations that set prices
• 'credit money' • US hegemony, Bretton
Woods• Keynesian welfare state
Patter of business cycle
• Strong cycles• inflation and deflation• cyclical wages
• Modest cycles• creeping inflation• steadily rising real
wages
"Fordism"
• Ford: high wages high demand• workers become an important source of
demand (mass consumption: cars ...)• high demand high investment high productivity growth : Competitive regulation + intensive
accumulation (productivity growth): mass production + mass consumption
Theory of rég. and growth
• institutions!
• Complementarity within institutional forms and between MoR and RoA
• distribution, demand, investment, productivity growth
• close to, but not married to, post-Keynesian approaches
GROWTH
• Neoclassical: preferences (time preference) + technology
• Kaleckian: demand (autonomous investment) + income distribution
• Regulationists: institutional structure (complementarities between institutions)
DISTRIBUTION
• Marx: class struggle, tendency of the rate of profit to fall due to mechanization
• Neo-classical: technology (MPL) and preferences
• NAIRU: bargaining outcome• Kalecki: exogenous (bargaining, market power)• Robinson/Kaldor: accumulution (saving out of
profits has to finance accu)
EMPLOYMENT
• Neo-classical: full employment (tech&pref)
• Keynes: SR: demand
• NAIRU: u* such that inflation is stable; bargaining positions (labor market inflexibility)
• post-Keynesians: no LR equilibrium unemployment
Kaldorian growth
• Cumulative causation: no stable equilibrium, but once off the equilibrium forces pull economy further away
• independent demand (Keynesian)
• endogenous (induced) tech progress Interaction of demand regime and
productivity regime
Induced tech. progress
• Economies of scale
• learning by doing
• division of labor
Neo-Kalodorian model
• Demand growth: y = y0 + y1.x
• Productivity growth: x = x0 + x1.y
• Interpretation of y1 and x1
• Emphasis of role of exports for pdy growth (in manufacturing)
Class, 11.12.02
• Summary & comparison
• open questions for exam (review of models)
• (if time:) neo-Kaldorian growth model
• feedback