Research Papers

Asset markets are indispensable in harnessing society’s diverse views and insights about future business performance. But those views are shaped as much by emotion and crowd mentality as by rational expectations.

For years, governments in India and much of the developing world have followed the advice of a paper arguing that labor regulations actually hurt workers. The problem? The research was wrong.

Starting with the literature on the estimates of the natural rate of interest, this paper critically analyzes the modern practice of identifying the benchmark rate of monetary policy with an equilibrium or neutral interest rate reflecting “fundamental forces” unaffected by monetary factors.

The American economy changed rapidly in the last half-century. The National Income and Product Accounts (NIPA) were designed before these changes started. They have stretched to accommodate new and growing service activities, but they are still organized for an industrial economy.

Wishful thinking and tinkering won’t cut it. Nothing short of a mass mobilization for deep de-carbonization across the global economy can avert the looming climate catastrophe. 

We need a new system of rules for the digital 21st century that enhances global digital cooperation and welfare. Nothing less than a historic gathering of the world’s key decision makers will get us there.    

In this paper we comparatively explore three claims concerning the disciplinary character of economics by means of citation analysis. 

Assessing the Peculiarities of Economics from Two Scientometric Perspectives

This paper examines the relationship between placement of publications in Top Five (T5) journals and receipt of tenure in academic economics departments.

This paper concerns itself with the joint effect of implicit subsidies that are built into the US housing-finance system and financial safety net.

“Dualism” in the structure of production across sectors of the US economy, employment by sector, productivity levels and growth, real wages, and intersectoral terms-of trade increased markedly between 1990 and 2016. 

Using datasets on transactions within business groups and social sentiment in China, I show that state-owned enterprises (SOEs) use internal funds to address social unrest, complying with the government’s political goals. 

This paper explains how hedge-fund activists are exerting power over corporate resourceallocation far in excess of the actual voting power of their shareholdings.

Converting an Obscure Agency Footnote into an “At Will” Nullification of Dodd-Frank’s Regulation of the Multi-Trillion Dollar Financial Swaps Market

Labor market regulation is a controversial area of public policy in both developed and developing countries.

A presentation from the panel “Research Evaluation in Economic Theory and Policy Making” at the 2018 G20 Global Solutions Summit in Berlin

Alberto Baccini’s presentation for INET’s panel on research evaluation at the G20 Global Solutions Summit in Berlin, May 2018.

Has the global financial crisis of 2007 had a visible impact on the economics profession?

Adair Turner, Chair of the Institute for New Economic Thinking, Lecture at School of Advanced International Studies, Johns Hopkins University, Washington DC April 10th 2018

“Meso” level analysis of 16 producing sectors sheds light on broad forces shaping growth of employment and profits. 

Over the last four decades, Americans have consistently told pollsters that they favor higher taxes on business and the wealthy, even as tax policy has moved sharply in the other direction.

Are regulatory interventions delayed reactions to market failures or can regulators proactively pre-empt corporate misbehavior?

Money in politics is not a strictly American phenomenon. In France, despite strong campaign finance laws, campaign donations have a direct influence on legislative and municipal election results.

A critical analysis of Piketty’s work

A large literature has detailed the seminal roles played in the Civil Rights Movement by activists, new political organizations, churches, and philanthropies. But black-owned businesses also provided a behind-the-scenes foundation for the movement’s success.

To get justice, targets must show measurable harm: economists can help.

The US federal lobbying industry, based in Washington DC, is major focal point for political money and the exercise of influence, with expenditures peaking at approximately $2.5 billion per annum during the first Obama administration. 

The U.S. presidential election of 2016 featured frontal challenges to the political establishments of both parties and perhaps the most shocking election upset in American history.

The consensus that reigned in macroeconomics before the financial crisis has come under renewed attack.

One might think of the satisfied consensus reigning in macroeconomics before the financial crisis (and still relatively entrenched) as evidence of “Groupthink” in a “Divided State”

The wind appears to be back in the sails of the Eurozone economy ….

The current crisis is the culmination of a process of integration that has profoundly changed the structure of each member state, their inter-relations and their power relations. One of its side effects was the rediscovery of the terms ‘centre’ and ‘periphery’ to analyse the economic situations of the European countries.

The euro area has been experiencing a prolonged period of weak economic activity and very low inflation.

Some fresh reflections on ECB policy

Veiling among Muslim women is modeled as a commitment mechanism that limits temptation to deviate from religious norms of behavior. 

This paper examines the value of connections between German industry and the Nazi movement in early 1933. Drawing on previously unused contemporary sources about management and supervisory board composition and stock returns, we find that one out of seven firms, and a large proportion of the biggest companies, had substantive links with the National Socialist German Workers’ Party. Firms supporting the Nazi movement experienced unusually high returns, outperforming unconnected ones by 5% to 8% between January and March 1933. These results are not driven by sectoral composition and are robust to alternative estimators and definitions of affiliation. 

Stock Market Returns and Corporate Networks 

“The Failure of Democracy” – “The weaknesses of Weimar” Do headlines such as these suggest that the whole architecture of the first German republic was wrong, that it was doomed right from the start, that the “collapse” was unavoidable?

In the paper that we present this afternoon, Soren Johansen, Anders Rahbek, Morten Tabor, and I introduce the Qualitative Expectations Hypothesis (QEH) as a new approach to modeling macroeconomic and financial outcomes.

After re-iterating five well-known theorems about the properties of conditional expectations in stationary settings—such as providing unbiased minimum mean square error predictions despite in- complete information, and the law of iterated expectations—we clarify unpredictability and illustrate its prevalence empirically.

I have read the various conference papers and am struck by the fact that many use the (omnipresent New-Keynesian) model of an aggregate loanable funds market to diagnose secular stagnation and investigate possible remedies.

This paper shows that aging has positive effect on output growth per capital at positive interest rates, due to capital deepening.

We explore the transmission mechanism of income inequality to output.

The past 30 years has witnessed a worldwide decrease in real interest rates. We demonstrate that a large part of the fall in interest rates can be explained by changes in demography, which are as the result of a sudden fall in fertility rates across all of the advanced economies in the early 1970s.

We examine the hypothesis that the slowdown in productivity following the Great Recession was in significant part an endogenous response to the contraction in demand that induced the downturn.

The concern that an economy could experience persistent, and in some sense unusual, weakness goes back to Keynes’s General Theory and led Alvin Hansen to coin the term “secular stagnation.”

This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century.

Long-term real interest rates across the world are low, having fallen by about 450 basis points (bps) over the past thirty years.

We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by high unemployment and weak growth.

This paper replaces an earlier version of a paper released in 2014 under the title “A Model of Secular Stagnation.”

The prevailing wisdom that aggregate demand ‘shocks’ determine short-run cyclical fluctuations around a supply-determined equilibrium growth rate and an associated equilibrium unemployment rate (or NAIRU) has been called into question by various streams of literature in the last decades. Specifically, a recently revived literature on hysteresis finds significant persistence in the effects of recessions and negative aggregate demand shocks (Blanchard et al. 2015; Martin et al. 2015).

Given that this is a panel on that quintessential Enlightenment thinker Adam Smith, I can think of no better way to begin my remarks than to invoke that most enlightened of modern economists, Kenneth Boulding, who in 1971 penned the delightful essay, “After Samuelson, Who Needs Adam Smith?” 

When priests and princes lost their monopoly over the big questions of human existence over the course of the Enlightenment, philosophers, poets, and ordinary people struggled to find out the answers on their own. 

Adam Smith’s modern fame as the founding father of economics has, until relatively recently, obscured the fact that he saw himself as a moral philosopher.

The road towards a decent society; lessons from classical political economy

The path to holding fossil fuel producers accountable for climate change & climate damages 

What economics can – and can’t – tell us about climate change 

The Death of the Seventy-year American Empire  

As globalization proceeds rapidly, manufacturing industry in most of developed countries declined steadily. 

An Assessment and Some Policy Implications

The deregulatory zeal of the 1990s and 2000s has returned to the US and the post-Brexit plans to protect the City in the UK sound like the pre-crash light-touch mentality that fueled global regulatory arbitrage.  As a result, a foremost “challenge of our time” is to stop “subsidizing more one-way bets” and “doubling down on failure.”

On 23 June 2016, the British electorate voted to leave the European Union (EU). We analyse vote and turnout shares across 380 local authority areas in the United Kingdom.

Unpacking the Effect of Trade on Workers and Voters 

Support for populism is often attributed to xenophobia, racism, sexism; to anger and resentment at immigrants, racial or ethnic minorities, or “uppity” non-traditional women. According to these accounts , people who feel socially resentful may reject established politicians as favoring those “others” over people like themselves, and turn to outsider populistic leaders.

This paper discusses what we have learned about the debt build-up in advanced societies over the past century. It shows that the extraordinary growth of aggregate debt in the past century was driven by the private sector.

The debt-growth relationship is complex, varying across countries and being affected by global factors. While there is no simple universal threshold above which debt-to-GDP becomes a significant brake on growth, based on data from the last four decades we show that high and rising public debt burdens slow down growth in the long term.

We want an economy that generates stable and equitable growth—or what I call “sustainable prosperity.” We want productivity growth that makes it possible for the population to have higher living standards over time. We want an equitable sharing of the gains from productivity growth among those whose work efforts and financial resources contribute to that growth. And we want sufficient job stability to enable workers to remain in productive employment for some four decades at work while providing them with enough savings to provide them with adequate incomes over some two decades of retirement.

Building symbiotic public-private partnerships

Can a Policy of Guaranteed Basic Income Return Mature Market Economies to les Trente Glorieuses?

How far are economists implicated in the rise of ‘fake experts’ and ‘fake news’?

The contemporary literature on neoliberalism has grown so large as to be unwieldy. For some on the left, this has presented an occasion to denounce it altogether.

Is Comparative Advantage the Ideology of the Comparatively Advantaged? 

A better set of approaches for the 21st century.

The Electoral Consequences of Rising Trade Exposure

Decomposition by such an important category as gender helps us understand the economy at the macro level, and design macroeconomic policy, better. It also provides the foundation for advocating equal gender rights and outcomes. But, where gendered policy issues arise in mainstream macroeconomics (income maldistribution, labour market composition, etc.) the subject matter is narrowed by its microfoundations, by focusing on GDP growth and on suboptimal outcomes being explained by market imperfections.

Growing income inequality is threatening the American middle class, and the middle class is vanishing before our eyes. We are still one country, but the stretch of incomes is fraying the unity of our nation.

The Precariat under Rentier Capitalism Guy Standing We are in the midst of a Global Transformation, analogous to Karl Polanyi’s Great Transformation described in his seminal 1944 book. Whereas Polanyi’s Transformation was about constructing national market systems, today’s is about the painful construction of a global market system. To use Polanyi’s term, the ‘dis-embedded’ phase has been dominated by an ideology of market liberalisation, commodification and privatisation, orchestrated by financial interests, as in his model. The similarities also extend to today’s fundamental challenge, how to construct a ‘re-embedded’ phase, with new systems of regulation, distribution and social protection.

In the economic literature, several scholars have addressed the narrative of a two-stage European crisis. In a first stage, the so-called “he-cession”, men would have been hit the most by the economic recession induced by the financial crisis. Shortly thereafter, in the “she-austerity” stage, women would have suffered the heaviest burdens of the fiscal retrenchment measures. If that were the case, the policy response to the crisis would be producing an increase in the – already high pre-existing – gender inequality.

Especially in the wake of the Great Recession, calls for more diversity within economics are usually limited to appealing for greater diversity in the economists’ backgrounds, while diversity of opinion and approaches is often neglected.

The Academic and Professional Performance of the Chicago School, 1960-1985

Preliminary draft prepared for INET conference session “A Decade of Stagnation. Why?”

This paper analyzes the link between Kamakura Risk Information Services (KRIS) data on megabank default probabilities and credit spreads.

Economists’ infamous failure at predicting the recent financial crisis has brought new impetus to studies on diversity in the economics profession. Such studies have underlined how diversity plays a prominent role in enriching economic analyses.

The Theory of the Firm, Financial Flows, and Economic Performance

It is commonly overlooked that the concept of market efficiency embowers a time-dimension. Illustrating with an example from the class of persistent random walks, we show that a price process can be a martingale on one time-scale but inefficient on another. 

This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century.

Price gouging in the US pharmaceutical drug industry goes back more than three decades. 

Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment 

Conventional wisdom has it that the primary function of the stock market is to raise cash for companies for the purpose of investing in productive capabilities. The conventional wisdom is wrong.

Citations Measure More Than Just Scientific Impact

An autobiographical paper by William J. Baumol, in which he recounts his academic life and career.  The paper is a contribution to a series of recollections and reflections on the professional experiences of distinguished economists which the Banca Nazionale del Lavoro Quarterly Review (now PSL Quarterly Review) started in 1979.

This paper presents a model of mass incarceration in the United States, which has the largest proportion of its population imprisoned among advanced countries.

The U.S. economy is widely diagnosed with two ‘diseases’: a secular stagnation of potential U.S. growth, and rising income and job polarization. The two diseases have a common root inthe demand shortfall, originating from the ‘unbalanced’ growth between technologically ‘dynamic’ and ‘stagnant’ sectors.

How the U.S. New Economy Business Model Has Devalued Science and Engineering PhDs

Long term labor shortages do not happen naturally in market economies. That is not to say that they don’t exist. They are created when employers or government agencies tamper with the natural functioning of the wage mechanism.

Widespread criticism of elites and their ‘experts ’ raises questions about how economists should perceive their role, and what role societies should give them. We invited four scholars to start an online conversation by sharing their perspectives 

This paper analyzes white attitudes towards African Americans in the United States at different points in a business cycle from 1979- 2014.

The business corporation is the central economic institution in a modern economy. A company’s senior executives, with the advice and support of the board of directors, are responsible for the allocation of corporate resources to investments in productive capabilities. Senior executives also advise the board on the extent to which, given the need to invest in productive capabilities, the company can afford to make cash distributions to shareholders. Motivating corporate resource-allocation decisions are the modes of remuneration that incentivize and reward the top executives of these companies. A sound analysis of the operation and performance of a modern economy requires an understanding of not only how much these executives are paid but also the ways in which the prevailing system of executive pay influences their decisions to allocate corporate resources.

On June 2, 1965, under a mandate established by Title VII of the Civil Rights Act of 1964, the U.S. Congress created the Equal Employment Opportunity Commission (EEOC) to enforce federal anti-discrimination laws related to employment. The expectation was that African Americans would be prime beneficiaries of the EEOC.

We examine whether personal wealth interests affect politicians’ decisions about stabilizing financial markets.