Harmonisation of Old-age Security Within the European Union

Not sufficiently harmonised national pension systems withinthe European Union distort the allocation of labour and endangerredistributive activities. This paper identifies the most decentralisedlevel of harmonisation which guarantees efficient allocationand enables redistribution. For this, we build on theoreticalresults from the literature to evaluate the realised distributionof the legal power between the European Union and the MemberStates and the resulting level of harmonisation. We find thatharmonisation is sub-optimally low. Binding rules guaranteedby the European Union are needed implying that the Member Stateshave to concede more fundamental responsibilities to the EuropeanUnion. (JEL F22, H55, K33, N34)     

Breaking the mould: an institutionalist political economy alternative to the neo-liberal theory of the market and the state

The paper criticises the currently dominant neo-liberal discourseon the role of the state and proposes an alternative approachthat will allow us to overcome its shortcomings, especiallyits inadequate analyses of the role of institutions and politics.It argues that the central problem with the neo-liberal frameworklies not in its excessively anti-interventionist policy conclusions,as some of its critics believe, but in the very ways it envisagesthe modus operandi of the market, the state, institutions andtheir interrelationships. The paper then discusses how we mayconstruct the alternative approach of ‘institutionalistpolitical economy’.     

Did Partial Globalization Increase Inequality? The Case of the Latin American Periphery, 1950-2000

Inequality is an important threat to the globalization of theworld economy that we experience today. This contribution usesthe coefficient of height variation as a measure of inequality.This indicator covers not only wage recipients, but also theselfemployed, the unemployed, housewives, children, and othergroups who may not participate in a market economy, for theperiod 1950–79, for which income inequality data is mostlyunavailable or inconsistent. It turns out that within-countryinequality is higher in time periods of greater openness. Thisresult is confirmed for the time period 1950–2000, anda much broader model. (JEL I12, I32, N33)     

The stock market and investment: another look at the micro-foundations of q theory

This paper introduces a novel distinction between real q andfinancial q. The paper examines three versions of financialq developed by Brainard and Tobin, Minsky and Hayashi, respectively.These theories differ regarding the nature of stock market pricedetermination and their use of marginal productivity theory.It is shown that non-profit maximising behaviour by managersdoes not invalidate q theory. It is also shown that if managersand shareholders have different profit expectations, this leadsto an equilibrium value of q that differs from unity. Lastly,the implicit claims in q theory regarding the efficient roleof stock markets as regulators of capital accumulation are shownto depend on assumptions about stockholder behaviour.     

Does Partisan Heritage Matter? The Case of the Federal Reserve

Received evidence suggests that changes in appointer- and overseer-preferencesinfluence monetary policy (i.e., partisan heritage matters).Evidence presented here, on the other hand, is consistent withchanges in the cost of pursuing a common preference influencingpolicy. I draw this evidence from a panel of Federal Open MarketCommittee (FOMC) votes and find support for the following conclusions:(1) Federal Reserve Board (FRB) governors who were nominatedand confirmed by the same party (Republican or Democrat) prefersignificantly looser policy than do other FOMC members. (2)Monetary policy is significantly looser when either party controlsthe oversight mechanism (i.e., the presidency and Senate) thanwhen control is split. (3) Oversight acts less forcefully ondistrict bank presidents than on FRB governors. In short, thepresent evidence suggests that political agents from both partiesprefer loose money and pursue this preference more efficientlywhen their parties are aligned.     

The Role of the Natural Rate of Interest in Monetary Policy

This paper examines the role of the natural rate of interestin the conduct of monetary policy. The natural rate figuresprominently in many theories of the business cycle and of inflationfluctuations, and therefore has the potential to play a keyrole in monetary policy given the current mandates of many centralbanks. However, the presence of financial imperfections andmeasurement uncertainty draw into question whether estimatesof the natural rate can be reliable indicators of excess demandpressures. Natural rate-based theories may, nonetheless, provideuseful guidance in the formulation of desirable monetary policies.(JELE21, E31, E43, E58)     

Lessons of the 1999 Abolition of Intra-EU Duty Free Sales for the New EU Member States

The abolition of intra-EU duty free was critically discussedand accompanied by a vigorous and well-financed lobbying campaignby the duty free industry. The opponents of this resolutionargued that such a tax-free sales sector created jobs and hardlyreduced the value added and excise tax revenue of individualcountries. In their opinion, the duty free trade not only contributedto the reduction of the travel fare but also could be characterisedas a supplement to the normal retail trade for some products.The challenges for some specific industries led by the abolitionof duty free shopping appear to be considerable in the short-term.However, theoretical and empirical examinations made in thisstudy suggest: (a) intra-EU duty free shopping disturbs theallocation neutrality guaranteed in the single market, (b) macroeconomicsignificance of duty free shopping is rather negligible, and(c) some background studies made for the lobbyists exaggeratethe negative impacts of eliminating intra-EU duty free shopping.These three important arguments, which can also be applied tothe new EU Member States, justify the abolition of intra-EUduty free shopping. (JEL F10; F15; F18; E62; P20)     

Computation and the Theory of Customs Unions

This paper reports on research that uses computational techniquesto assess whether or not various propositions that have beenadvanced as plausible in the literature on the theory of customsunions actually hold. This research blends theory and numericalsimulation to get insights into the likelihood that\ varioustheoretical propositions proposed in the customs union literaturehold. (JEL F10, F13, F15}     

Formal and Informal Labour Markets: Challenges and Policy in the Central and Eastern European New EU Members and Candidate Countries

The paper aims at comparing the formal and informal labour marketsin the Central and Eastern European new EU Member States andcandidate countries of the European Union. First, the currentsituation of the labour market is described, focusing on therecent developments since the breaking up of the East. Thenthe policy design of these labour markets is depicted and itseffects on formal and informal labour markets. The most importantchallenges for employment policy as well as the effects of enlargementon the labour markets are analysed. The paper ends with a shortsummary. (JEL J21, J23, H26, H11, O17, O57)     

EU Enlargement, Migration and the New Constitution

The paper deals with the effects of migration resulting fromEU Eastern enlargement on the welfare states of Western Europe.Although migration is good in principle, as it yields gainsfrom trade and specialization for all countries involved, itdoes so only if it meets with flexible labour markets and ifit is not artificially induced by gifts of the welfare state.This is not the present state of affairs in Western Europe.In addition to measures that make labour markets more flexible,the introduction of delayed integration of working migrantsand the home country principle for nonworking migrants is arational reaction of the state. The proposed new EU constitution,which contains far-reaching rules for a European social union,should be amended accordingly. (JEL E2, F2, H0, J3, J6)     

A materialist development of some recent contributions to the labour theory of value

The paper offers a novel interpretation and affirmation of theopening arguments of Capital, answering the fundamental butneglected question of why labour is the substance of value.Marx's arguments require that two philosophical threads, oftenseparated in the literature on value, be woven together. Theargument that value is the intrinsic ‘content’ makingcommodities exchangeable employs the thread of realism. Theargument that abstract labour is the emergent ‘socialsubstance’ of value employs the thread of dialectics.This interpretation develops the materialist and dialecticalphilosophy of E.V. Ilyenkov and deepens the approach to valuetheory initiated by Ben Fine.     

The Phillips Curve, the IS Curve and Monetary Transmission: Evidence for the US and the Euro Area

In this paper we assess the empirical performance of commonlyused empirical specifications of the baseline New Keynesianmodel for the US and the euro area. We estimate standard specificationsof the model and extended specifications also including non-standarddeterminants of aggregate supply and demand. The results suggestthat based on the standard specifications it is often not possibleto establish a significant link between the monetary policyinstrument and output and inflation. Based on the extended specificationsof the model, which take into account the significant effectof commodity prices on inflation and of house prices on theoutput gap, we are generally able to restore a significant monetarytransmission channel. (JEL E3, E52, C22)     

Welfare Migration: Is the Net Fiscal Burden a Good Measure of its Economic Impact on the Welfare of the Native-Born Population?

Migration of young workers (as distinct from retirees), evenwhen driven in by the generosity of the welfare state, slowsdown the trend of increasing dependency ratio. But, even thoughlow-skill migration improves the dependency ratio, it neverthelessburdens the welfare state. Recent studies by Smith and Edmonston(1977), and Sinn et al. (2003) comprehensively estimate thefiscal burden that low-skill migration imposes on the fiscalsystem. However an important message of this paper is that inan infinite-horizon set-up, one cannot fully grasp the implicationsof migration for the welfare state, just by looking at the netfiscal burden that migrants impose on the fiscal system. Inan infinite-horizon, overlapping generations economy, this netburden, could change to net gain to the native born population.(JEL F22, H3, J10)     

Persistent demi-regs and robust tendencies: critical realism and the Singer-Prebisch Thesis

Debate about whether the terms of trade for primary productsrelative to manufactures have a tendency to deteriorate hasbeen ongoing for half a century. The phenomenon itself providesan example of a persistent contrastive demi-regularity. Thisis viewed as the result of a robust tendency, understood asan enduring and pervasive characteristic effect generated bya powerful and stable underlying causal mechanism. On this basis,the key problem for primary products lies in the biologicallimits on consumption, to which may be added capitalism-specifictendencies affecting processes of production and distribution.The paper concludes by arguing that the relevant holistic generictendency under capitalism involves a long-term contraction inthe primary product share of world trade.     

A Methodological Note on Long-Period Positions

This brief paper seeks to overcome a number of methodologicaldisagreements among economists who use the long-period methodof analysis. In particular, it attempts to clarify the key distinctionsbetween convergence and stability, convergence and gravitationand chronological and theoretical persistence. The conclusionis that the theoretical soundness of the long-period methoddepends on the convergence of actual magnitudes towards theirlong-period counterparts, an empirical issue to which theoreticalconsiderations of stability are irrelevant.     

Political Participation of Mobile Citizens and the Size of the Welfare State

This paper deals with the implications of personal mobilityfor political participation of citizens and for the resultingsize of the welfare state. We show that mobility of citizensmay influence the individual decision to participate in thepolitical process and thereby may change policy outcomes. Ifcitizens who prefer a larger public sector are relatively immobile,the size of the welfare state may increase with mobility. (JELD72, J61)