An Alternative Approach to the Institutional Economics of the Eurozone Crisis

I argue that the Eurozone crisis is neither a crisis of European sovereigns in the sense of governmental over-borrowing, nor a crisis of sovereign debt market over-lending. Rather, it is a function of the “sovereign debt market” institution itself. Crisis, I argue, is not an occurrence, but an element fulfilling a precise technical function within this institution. It ensures the possibility of designating — in the market’s day-to-day mechanisms rather than analytical hindsight — normal (tranquil, undisturbed) market functioning. To show this, I propose an alternative view on the institutional economics of sovereign debt markets. First, I engage literature on the emergent qualities of the institutions “market” and “firm” in product markets, concluding that the point of coalescence for markets is the approximation of an optimal observation of consumer tastes. I then examine the specific institution “financial markets,” where the optimal observation of economic fundamentals is decisive. For the specific sub-institution “sovereign debt market,” I conclude that the fundamentals in question — country fundamentals — oscillate between a status of observable fundamentals outside of markets and operationalized fundamentals influenced by market movements. This, in turn, allows me to argue that the specific case of the Eurozone crisis is due to neither of the two causes mentioned above. Rather, the notion of “crisis” takes on a technical sense within the market structure, guaranteeing the separation of herd behavior and isomorphic behavior on European sovereign debt markets. By the same token, the so-called Eurozone crisis ceases to be a crisis in the conventional sense.     

Did large institutional investors flock into the technology herd? An empirical investigation using a vector Markov-switching model

This article investigates whether large non-bank institutional investors herded during the dot-com bubble of the 1990s. We use the vector Markov-switching model of Hamilton and Lin (1996) to analyse the technology stockholdings of 115 large institutional investors from 1980 to 2012. By imposing different restrictions on the elements of the transition probability matrix, we are able to test for various lead/lag scenarios that might have existed between the technology stockholding of each investor and that of the residual market. We find that only 17.4% of the investors in our sample herded during the dot-com bubble. Thus, during the dot-com bubble, herding among large institutional investors was not an especially widespread phenomenon. Among those investors that herded, 80% herded during the run-up, 10% during the collapse and 10% during both phases of the dot-com bubble. About 23% of all investors in our sample exited from the technology sector before the bubble collapsed. These results seem to support Abreu and Brunnermeier’s (2003) theory of bubbles and crashes.     

Labour market segmentation and union wage gaps

Abstract

There has been a great deal of research regard the effects of unions on union – non-union wage gap. Most of the studies regarding the impact of unions on wages have assumed that apart from the division between union and non-union workers, the labour market is relatively homogeneous. A number of economists, however, have argued that the labour market is segmented, implying that there are distinct labour markets and that some workers employment opportunities are concentrated in “bad jobs” while other workers employment opportunities are concentrated in “good jobs” which are rationed.

This paper will explore whether the relative wage differential between union and non-union workers differs between the independent primary, subordinate primary and secondary labour markets. Labour market segments are defined using “job zones”. “Job zones” are distinct groups defined by the level of specific vocational preparation necessary for a particular occupation, allowing for the comparison of skill levels and training for each occupation. The data on “job zones” comes from the Occupational Information Network database (O?Net). We estimate separate equations for union and non-union workers in each segment using data from the Current Population Survey and calculate union non-union differentials for each labour market segment. The findings of this paper suggest that the greatest differentials are in secondary labour markets followed by differentials in the subordinate primary labour market and that the smallest wage differentials are in the independent primary labour market.     

The Role of Income Effects in Early Retirement

We provide a long‐term perspective on the individual retirement behavior and on the future of retirement by emphasizing the role of (negative) income effects. We consider a political economic theoretical framework, with actuarially “fair” and “unfair” early retirement schemes, and derive a political equilibrium with positive social security contribution rates and early retirement. A reduction in the wages in youth, consistent with the recent labor market trends since the massive introduction of temporary jobs, induces workers to postpone retirement, and—in the “unfair” system—leads to lower contribution rates. A reduction in the growth rate of the economy has opposite effects on the retirement decisions, leading—in the “unfair” system—to more early retirement. Aging induces a negative income effect, but has also an opposite political effect on social security contributions and retirement decisions. For an actuarially “fair” social security system, we provide conditions for the political effect to dominate; in an “unfair” scheme, numerical simulations confirm a slight predominance of the political effect, as contribution rates increase. These results may shed some light on the future of early retirement in aging societies.     

What economic agents do: How cognition and interaction lead to emergence and complexity

Kohn (The Cato Journal, 24(3):303–339, 2004) has argued that the neoclassical conception of economics—what he terms the “value paradigm”—has experienced diminishing marginal returns for some time. He suggests a new perspective is emerging—one that gives more import to economic processes and less to end states, one that bases behavior less on axioms and more on laboratory experiments. He calls this the “exchange paradigm”. He further asserts that it is the mathematization of economics that is partially at fault for leading the profession down a methodological path that has become something of a dead end. Here I suggest that the nascent research program Kohn has rightly spotted is better understood as distinct from its precursors because it is intrinsically dynamic, permits agent actions out of equilibrium, and treats such actions as occurring within networks. Analyzing economic processes having these characteristics is mathematically very difficult and I concur with Kohn’s appeal to computational approaches. However, I claim it is so-called multi-agent systems and agent-based models that are the way forward within the “exchange paradigm,” and not the cellular automata (Wolfram, A new kind of science, 2002) that Kohn seems to promote. Agent systems are generalizations of cellular automata and support the natural abstraction of individual economic agents as software agents.     

The response of firms to eligibility thresholds: Evidence from the Japanese value-added tax

It is common to define benefit eligibility for small business policies by restrictions on the firm size. This paper documents the effects of the value-added tax (VAT) threshold in Japan, focusing on the incentives for a large firm to “masquerade” as many small firms by separately incorporating business segments. A comparison of the corporate size distributions before and after the VAT introduction of 1989 shows a clustering of corporations just below the threshold—a pattern that is attributable to the behavioral responses. To rule out the confounding influences of the changes in the company attributes over the years, we applied a semiparametric density decomposition technique developed by DiNardo, Fortin, and Lemieux (DiNardo J., Fortin N.M., Lemieux T., Labor market institutions and the distribution of wages, 1973–1992: a semiparametric approach. Econometrica 1996; 64; 1001–1044). This study suggests that the masquerading behavior by firms may be commonplace in other settings.     

Animal spirits and the composition of innovation in a lab-equipment R&D model with transition

We study the effect of animal spirits on the composition of aggregate R&D, the consumption level and economic growth in a tournament model of horizontal and vertical R&D. By considering a full lab-equipment specification, the model predicts a positive effect of animal spirits on the balanced-growth-path (BGP) level of per-capita consumption without impacting on economic growth and on aggregate vertical R&D. However, transition is slower under “waves of enthusiasm”, implying a longer period in which growth rates are higher than the BGP level. An economy that is subject to expectations shocks then converges at a time-varying speed. On average over time, transition is longer but less “painful”—i.e., with higher per-capita consumption levels—than otherwise.     

Profiteering from the Dot‐Com Bubble,Subprime Crisis and Asian Financial Crisis

The paper explores the characteristics associated with the formation of bubbles that occurred in the Hong Kong stock market in 1997 and 2007, as well as the 2000 dot‐com bubble of Nasdaq. It examines the profitability of technical analysis (TA) strategies generating buy and sell signals, with and without our proposed trading rules. The empirical results show that, by applying long and short strategies during the bubble formation and a short strategy after the bubble burst, it not only produces returns that are significantly greater than buy‐and‐hold strategies, but also produces greater wealth compared with TA strategies without trading rules. We conclude that these bubble detection signals help investors generate greater wealth from applying appropriate long and short moving average (MA) strategies.     

Pension Fund Herding and the Influence of Management Style

In this article, we study the herding phenomenon in Spanish equity pension funds with European investment locations from 2002 to 2012, considering whether the development of different investment strategies by the managers results in herding. In addition, we analyze the performance-herding relationship, observing whether pension fund performance decreases or increases when pension funds herd. Using the herding measure of Lakonishok et al. [1992], we do not find strong imitation behavior, although herding in the market and book-to-market styles are higher. Those pension funds that do not herd or that follow distinctive strategies do not present significant differences in performance with respect to herding funds.     

Can sustainable consumption be learned? A model of cultural evolution

This paper shows how sustainable consumption patterns can spread within a population via processes of social learning even though a strong individual learning bias may favor environmentally harmful products. We present a model depicting how the biased transmission of different behaviors via individual and social learning influences agents' consumption behavior. The underlying learning biases can be traced back to evolved cognitive dispositions. Challenging the vision of a permanent transition toward sustainability, we argue that “green” consumption patterns are not self-reinforcing and cannot be “locked in” permanently.     

A Note on Forecasting Emerging Market Exchange Rates: Evidence of Anti‐herding

Using survey forecasts of a large number of Asian, European, and South American emerging market exchange rates, we studied empirically whether evidence of herding or anti‐herding behavior of exchange‐rate forecasters can be detected in the cross‐section of forecasts. Emerging market exchange‐rate forecasts are consistent with herding (anti‐herding) if forecasts are biased towards (away from) the consensus forecast. Our empirical findings provide strong evidence of anti‐herding of emerging market exchange‐rate forecasters.     

Toward Generalized Evolutionism: Beyond “Generalized Darwinism” and Its Critics

This article seeks to transcend the debate regarding “generalized Darwinism” or “universal Darwinism” for the social sciences. Highlighting recent discoveries in evolutionary biology, the article argues that it is no longer tenable to insist that (neo-)Darwinism is the only proper doctrine for understanding biological evolution. Moreover, social evolution is much more than purely (neo-)Darwinian or (neo-)Lamarckian. As such, the debate on whether we deploy only (neo-)Darwinism or (neo-)Lamarckism — generalized or not — to understand social evolution is a red herring. Instead, social scientists should embrace “generalized evolutionism,” a more accommodating and versatile doctrine that subsumes “(generalized) Darwinism” or “(generalized) Lamarckism.” Empirical inquiries that deploy “generalized evolutionism” have shed important new light on some critical puzzles in human society: from institutional change to the foundation of economic development before 1500 AD, through the coming of the industrial revolution, to the evolution of the international system. More empirical efforts along this line of theorizing are needed.     

Do forecasters of major exchange rates herd?

This paper uses forecast data from 1995 through 2014 to examine, whether the market consensus of exchange rate forecasts has an effect on the forecasts of individual experts. Such an effect could take the form of herding or anti-herding. We use a very comprehensive data set to study experts' forecasts of three of the most important exchange rates. The results indicate that anti-herding vis-à-vis the consensus of forecasts occurs more often than herding. We also show how the increase in the forecasting horizon and financial crises affect the intensity of anti-herding behavior. Moreover, we report that the (anti-)herding behavior does not affect the forcasting performnce.     

Robert Brenner on political accumulation and the transition to capitalism

This paper is an immanent critique of Robert Brenner’s writings on the transition from feudalism to capitalism. The concept “immanent” is defined as a logic of implication, according to which a text or theory is evaluated within the terms that it sets for itself, to determine whether its objectives and assumptions are true in the way they are said to be true. Using this method of critique, the paper shows how Brenner’s concept of “political accumulation” undermines his own initial claim that the balance of class forces between lords and peasants determined the long-term trends of preindustrial Europe, in that this concept points toward intralord struggles dominated by military interests. The paper also discusses why Brenner’s account of France’s tax/office state seriously weakens his postulate that “surplus extracting relations” were the “fundamental” relation of fuedalism, on the grounds that office-holding reflected an unequal distribution of property based upon status. Finally, the paper draws out the theoretical implications of these contradictory instances, to delineate ways in which Brenner’s basic theory may be sublated within a more comprehensive account.     

国际“过度旅游”现象述评

“过度旅游”对可持续发展具有关键性的负向影响。人类旅行与旅游活动经历了一个漫长的发展过程,2000年前后,全球大多数国家和地区都已经或开始进入大众旅游时代。旅游发展的各种影响——经济的和非经济的、积极的和负面的——都在不断扩大。从总的趋势而言,当人类旅行与旅游活动人数规模、访问区域、增长速度和影响较小的时候,对旅游发展的反对声音多局限在特定地区、时段和人群,但随着旅游规模扩展与速度逐渐加快,“拥挤度”加大的情况下,反对的声音则越来越强烈,甚至开始从情绪上反对转变成社会行动。到21世纪第二个十年的后期,“过度旅游”开始变成一种“全球关注”,关注的群体由最初的旅游目的地居民扩展到学术界、国际旅游机构、旅游业界、国家政府相关机构以及各类媒体,旅游者本身也参与其中。这一关注在2018年形成高潮,“overtourism”正式被英国《牛津英语词典》选入当年的年度词汇。于是,国际社会越来越关注“过度旅游”现象,并以不同的方式确定其含义,评估其影响,探讨产生的原因和谋划应对策略与行动。尽管对“过度旅游”现象的认识还存在着很多分歧,政府、业界、社会乃至旅游者对待这一现象的态度大相径庭,但毕竟这一现象引起了全球的关注,因此,了解和研究这一现象,探讨其发展趋势,应当是旅游相关学术机构的责任。本文旨在为对“过度旅游”现象的来龙去脉做一个初步的梳理,以期推进我国学术界关注这个“全球关注”现象的研究,促进我国旅游业健康有序地发展。也许“过度旅游”在中国尚未成为严重问题,但未雨绸缪、防患于未然是非常必要的。更何况,在全球更加开放,全球化不断深化的国际背景下,一个遍及全球的问题,恐怕中国也很难独善其身。     

Darlings and Orphans: Interactions across Donors in International Aid

We examine how the bilateral aid flows from an individual donor to a recipient depend on the aid flows from all other bilateral and multilateral donors to that recipient. Thereby, we assess to what extent issues including donor coordination, free‐riding, selectivity, specialization, and common donor interests drive bilateral aid allocations. We find that others’ bilateral flows lead to a significant increase in aid flows from a particular donor, but primarily within a given year. The effects are particularly pronounced for large donors and so‐called “darling” recipients. Overall, the results suggest that herding is a dominant feature of aid inter‐relationships.     

The past and future of knowledge-based growth

This paper consolidates two previously disconnected literatures. It integrates R&D-based innovations into a unified growth framework with micro-founded fertility and schooling behavior. The theory suggests a refined view on the human factor in productivity growth. It helps to explain the historical emergence of R&D-based growth and the subsequent emergence of mass education and the demographic transition. The model predicts that the erstwhile positive correlation between population growth and innovative activity turns negative during economic development. This “population-productivity reversal” explains why innovative modern economies are usually characterized by low or negative population growth. Because innovations in modern economies are based on the education of the workforce, the medium-run prospects for future economic growth—when fertility is going to be below replacement level in virtually all developed countries—are better than suggested by conventional R&D-based growth theories.     

Equity or intention: it is the thought that counts

Economists theorize how and when other-regarding behavior determines experimental outcomes. Two approaches are: (1) explicitly model fairness—intentions matter and (2) use inequity aversion as a proxy for fairness—only the outcome matters. The first approach is consistent with people behaving as though they think, “He was as fair as he could be; do not punish him”. The second approach is consistent with people behaving as though they think, “Despite his best efforts, the outcome was inequitable; punish him”. The results of this experiment are consistent with the fairness-based model, that is, “It is the thought that counts”.     

虚拟经济:人类经济活动的新领域

研究虚拟经济旨在表明人类经济活动的变化 ,对此必须排除固有的观念 ,必须深入理解马克思经济学中的各种虚拟资本论。虚拟经济不能等同于虚拟资本、网络经济、泡沫经济。当代值得关注的虚拟经济是衍生金融商品交易、电子货币和网络银行。     

RECURRENT BUBBLES*

We study rational bubbles in a standard linear asset price model. We first consider a class of bubble processes driven by multiplicative i.i.d. shocks. We show that a bubble process in this class either diverges to infinity with probability one, converges to zero with probability one, or keeps fluctuating forever with probability one, depending on investors' “confidence” in expected bubble growth. We call a bubble process having the last property “recurrent.” We develop sufficient conditions for a bubble process to be recurrent when it is driven by non‐i.i.d. shocks, when the risk‐free interest rate is not constant, and when the process is driven by non‐i.i.d. shocks and the risk‐free interest rate is not constant. In the last case we demonstrate via simulation that there can be a prolonged period in which both the bubble and the interest rate stay close to zero.