The economics of poverty in poor countries

This paper examines the links that have recently been studied between poverty, high fertility and undernourishment, on the one hand, and degradation of the local environmental-resource base and civic disconnection, on the other, in poor countries. An account is offered of a number of pathways involving positive feedbacks that create poverty traps, in which certain identifiable groups of people in an economy can get caught even when the economy in the aggregate experiences economic growth. The relevant policy implications are noted.     

Economic growth and poverty traps in sub-Saharan Africa: The role of education and TFP shocks

This paper investigates the “education-total factor productivity trade-off” in explaining income per worker differences between sub-Saharan (unlucky) and G7 (lucky) economies. First, we examine the dynamics of average years of schooling (i.e. education), capital per worker, income per worker, and total factor productivity (TFP) across sub-Saharan and G7 countries. We confirm that physical capital and education levels partially explain income per worker differences between lucky and unlucky economies. Second, we undertake a novel examination of the impact of technology shocks on income per worker, with the goal of understanding the role of technology variation in causing cross-country income per worker differences, and as a potential contributor to overall slow growth in the sub-Saharan region. In a vector autoregressive (VAR) framework, we show that the impact of “ad hoc” TFP shocks on income per worker is larger in unlucky economies than in lucky ones. We observe that average TFP volatility in the “unlucky world” is eight times higher than in the “G7 world”. We argue that the order of magnitude of the impact heavily depends on the level of the TFP volatility. Last, we suggest that the documented differences in the amount of physical capital and in the productivity of human capital between these two regions add conceptual support for the existence of poverty traps for sub-Saharan Africa.     

Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia

Much has been written on the determinants of technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data from Ethiopia. Historical rainfall distributions are used to identify consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance or alternative means of keeping consumption smooth leaves some trapped in low return, lower risk agriculture, one of the mechanisms through which poverty perpetuates itself in agrarian settings.     

Patterns of poverty among elderly Americans: a latent class Markov model

This article studies poverty persistence and the role of social security programmes on poverty among elderly in the US. We use a Latent Markov model to disentangle unobserved heterogeneity and state dependence. Because of its dynamic nature, unobserved heterogeneity is modelled to vary over time. This allows to capture different latent states of poverty that change over time. Result indicates the existence of three unobserved types evolving over time according to their propensity to be poor. Moreover, a strong persistence in poverty especially for women, individuals living alone and ethnic minorities is found. Finally, the estimates indicate that giving social assistance tends to reduce poverty.     

Austrian economics and the analysis of labor markets

Theory and policy relating to labor markets is dominated by the mainstream labor market model, although a less well-known, socioeconomic version can also be identified. The mainstream model is methodologically flawed and forced, thereby, to relegate any (serious) investigation of labor market institutions and/or social structures to the margins of its analysis. The socioeconomic account is not so much methodologically flawed, as methodologically ambivalent. While this ambivalence does not actually prevent the investigation of institutions and/or social structures, it does promote ambiguity whenever we inquire into the precise nature of the interaction between them and labor markets. Insights from Austrian economics, when used in collaboration with critical realist methodology, can play a part in augmenting the socioeconomic account, generating a totally new approach to the analysis of labor markets.

The ancient art of economics

Abstract

This article reviews ancient texts dedicated to the art of economics, narrating how the master was to manage his wife, slaves and things. The discourse on the economy of things focuses on defining the proper limits of wealth. The economy of the slaves included multiple technologies of classification, management and supervision that were to guide the master and the matron in their ‘use’ of slaves. The wife was a freeborn member of the polis who was doomed to spend her entire life in the economy as a governed subject who partakes in government only within the confines of the oikos.     

Water markets design and evidence from experimental economics

Market mechanisms are gaining increasing acceptance all over the world as a way of making more efficient use of scarce water resources. Designing regulatory frameworks that ensure both inter- and intra-temporal efficient allocations is a daunting task, especially if supply is stochastic and there is ample storage capacity. In addition to defining tradable rights, specific provisions must regulate the use of reservoirs. Commonly, water statutes include provisions that establish asymmetries regarding the allocation of water, and market restrictions that ban water trading across different users. In this article, we use data collected in a laboratory to test two specific market regulations included in the 1999 Water reform in Spain. First, junior right holders are not allowed to buy water from senior users. Second, the law does not explicitly define water rights over units left in reservoirs for the following season. Results suggest that trading restrictions among water right holders lead to welfare losses for senior users. It is shown that removing this restriction would increase senior right holders’ benefits, without reducing those of junior users. Results show that defining water rights over saved units across periods would increase the average stock levels of reservoirs, and reduce market price instability. The lessons learned from the Spanish experience are applicable to settings characterized by unstable natural water supply and the availability of large storage facilities.      

The quantitative turn in the history of economics: promises,perils and challenges

ABSTRACT

A quantitative turn in history of economic thought is looming. We argue that engineering it consciously is of crucial importance for historians of economics. We also highlight the limitations of quantitative techniques. Yet, the combination of qualitative and quantitative research could substantially enrich our narratives of the development of economics and its practice, of how ideas and tools disseminate and influence other spheres. A failed quantitative turn could lead our field to a house divided and, in the worst case, a civil war.     

The modern foundations of Marx's monetary economics

The first chapters of Capital are still often ‘tlerated’, Mirowski (1986: 222) reminds us, as a ‘regrettable metaphysical residuum of [Max's] Hegelian [past]’. Such ‘tolerance’ has unfortunate consequences, howeve, not the least of which is Marx's reputation for ‘theoretical metallism’, simple and derivative. This paper builds on the recent efforts of de Brunhoff (1981), Lavoie (1983) and others to deconstruct, with support from Grundrisse and related texts, the important thrid chapter of Capital, Marx's account of the universal equivalent's four functions. As it is identified here, the chapter's core includes ‘pody-Keynesian’ elements– a reversal of the Ricardian view of the quantity equation, an effective demand principle in which capitalists’ dcisions about the recommitment of hoards assume a prominent role, and the deermination of interest rates, in the short term, on the basis of liquidity preference-– but does not include, in the conventional sense, a commodity theory of money.     

Reliving the 1950s: the big push, poverty traps, and takeoffs in economic development

The classic narrative of economic development—poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income—has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce. Poverty traps in the sense of zero growth for low-income countries are rejected by the data in the whole period 1950–2001 and for most sub-periods. The poorest quintile also does not have significant negative growth of the relative income ratio to the world’s richest country over 1950–2001, nor is relative growth for the lowest quintile significantly different than other quintiles. The claim that “well-governed poor nations” are caught in poverty traps is rejected by simple regressions that control for both initial income and quality of government (instrumenting for the latter). The idea of the takeoff also does not garner much support in the data. Takeoffs are rare in the data, most plausibly limited to the Asian success stories. Even then, the takeoffs are not associated with aid, investment, or education spending as the standard narrative would imply.     

On the detection of extreme movements and persistent behaviour in Mediterranean stock markets: a wavelet-based approach

We combine the global Hurst exponent and Morlet wavelet multi-resolution analysis (MRA) to investigate the dynamic behaviour of six selected stock markets in the Mediterranean region. Specifically, we employ the resonance coefficients and their power spectra to identify potential extreme movements and long-term dependence in stock returns. Using weekly data for the period 2005 to 2010, our results reveal that the wavelet MRA is able to reconstruct the effects of major extreme shocks on stock returns of studied markets, such as the Asian financial crisis, the 9/11 terrorist attacks and the 2007–2009 financial crisis. Moreover, the wavelet-based global Hurst exponent indicates the presence of long-term dependencies in stock returns of all the considered markets, except for France where the anti-persistent behaviour is detected. Overall, our findings are useful to assess the stock market efficiency and provide new insights into stock market dynamics over different time scales.     

Pod learning: Student groups create podcasts to achieve economics learning goals

In this article, the authors examine two ways that they use music (i.e., popular song lyrics) as an active learning technique in an undergraduate history of economic thought course. First, they use music to help students grasp the ideas of the great thinkers in economics and see their relevance today. Second, because they require students to read original texts and write thesis-driven essays, they use music to teach essential skills related to such assignments. While the article focuses on how they use music as a pedagogical device to teach the history of economic thought, the use of music to teach essential skills could be applied to any economics course in which students engage in higher-level reading and writing.     

The law of one price: an examination of price integration between Europe and regional markets in Africa

This study examines the degree of price-integration of equity indices between the major markets of Africa, namely Morocco, Tunisia, Egypt, Kenya, Nigeria, Namibia and South Africa with the European markets of London and Paris. Vector Autoregressive and Autoregressive Distributed Lag methods reveal that African markets are largely price-segmented. The only markets that are price-integrated have shared economic and financial institutions, such as Namibia and South Africa, and Egypt, Tunisia and France. The evidence suggests that development policy should be focussed on enhancing existing institutions rather than embarking prematurely on regional integration.     

Five reasons for the use of network analysis in the history of economics

ABSTRACT

Network analysis is increasingly appreciated as a methodology in the social sciences. In recent years, it is also receiving attention among historians of science. History of economics is no exception in that researchers have begun to use network analysis to study a variety of topics, including collaborations and interactions in scientific communities, the spread of economic theories within and across fields, or the formation of new specialties in the discipline of economics. Against this backdrop, a debate is emerging about how network analysis can help address questions that are pertinent to the history of economics. With this paper, we want to push this debate one step forward by offering and discussing five reasons why network analysis should have a future in the history of economics.     

Housing as a wage and luxury good: absolute poverty and the distribution of income in supply-side economics

A fundamental tenet of supply-side economics is the ‘trickle-down’ effect, according to which a redistribution of income shares to those with higher incomes is supposed to result in sufficient income growth to make everyone better off. Apart from the inherent improbability of such an outcome, it is possible to argue that such a redistribution causes scarce resources to be transferred to luxury goods production, reducing the supply of the wage goods commodities in whose production those resources are used. The reduced availability of such commodities can give rise to an increase in absolute poverty (defined as the inability to afford basic necessities). This increase in absolute poverty forms a ‘threshold’ which must be more than balanced by an increase in real income due to the supply-side acceleration of economic growth before the ‘trickle-down’ effect may be said to have been realized. Some evidence from the UK is provided, together with a note on how this poverty mechanism affects the calculation of the retail Prices index.     

The economics of information: An exposition

The study of information as a choice variable has been given much more weight by disciplines other than economics. This paper tries to lay out the essential economic characteristics of information as an economic commodity. It discusses the reasons why usual market analysis fails and some of the problems that information creates for industrial structure. It is the treatment of information as a variable and its implications for economic behavior that needs further analysis. This is done by giving a formal statement of the role of information in economic decisions based on the use of information and applying it to specific forms of payoff and cost functions. That in many cases information is about rates leads to the conclusion that the value of new technical information is related to the scale of operation. Once information has been obtained its transmission is easy. Therefore it is difficult to make information into property and the incentives to create it will be lacking. In general the analysis shows that the special properties of information as an economic good have strong implications for the very role and meaning of the firm.I want to acknowledge the support of a grant from the Sloan Foundation     

住房的政治经济学:国际政治经济学的一个新视界

住房的政治经济学是欧美近年刚刚出现的研究领域,主要以比较政治经济学和国际政治经济学,特别是日常政治经济学作为理论基础,重新对住房金融制度、住房政策体系和住房市场进行审视。住房政治经济学为分析住房政策和当前的金融危机提供了不同的视角,并得出新的结论。这些视角和结论对中国发展和社会改革具有启示意义。本文按照主要议题、运行机制和理论基础对住房政治经济学研究进行了解读,并从时代背景、理论建构、逻辑关系和研究视角四个方面对住房政治经济学的发展方向和不足之处进行了剖析。最后讨论了住房政治经济学研究对当前中国的现实启示。