Inequality: The original economic sin of capitalism? An Evaluation of Thomas Piketty's Capital in the twenty-first century

This is a review article of Thomas Piketty's book “Capital in the twenty-first century”. Piketty promotes the old theme that, under capitalism, the rich tend to become richer and the poor become poorer, at least in relative terms. We consider whether the data really shows that wealth and income are becoming more concentrated; the role of income transfers (Piketty's data is for pre-tax and pre-transfer income) and other influences on inequality such as real estate prices; the implications of social and economic mobility; the role of the state in fostering inequality; and the determination of socially acceptable inequality. We conclude that Piketty has not succeeded in showing that the inequality r > g (the rate of return is greater than the rate of growth) is the principal determinant of inequality. Piketty offers neither an accompanying theory of social justice nor a theoretical framework to support his case. In particular, lacking is a revealed appreciation of the effects of high marginal tax rates on growth and efficiency.     

The equilibrium price path of timber in the absence of replanting: does Hotelling rule the forests too?

Prior to 1985, virtually all analyses of forestry economics took the price of timber as given. Since Mitra and Wan (1985), however, the literature has sought to solve social planning problems where the price of timber, as reflected in the path of the marginal utility of consumption, is endogenous. The purpose here is to focus directly on the equilibrium price path of timber under the stringent assumption that once a site is cleared, no new tree is planted and the site is used for some other purpose with an exogenously specified value. While extreme, this assumption permits us to show that familiar results from the Hotelling literature have their counterparts in forestry economics. The paper begins by describing the equilibrium price path if all trees are the same age and sit on sites of equal value. This turns out to generate a U-shaped price path under some circumstances. Heterogeneity is then introduced. It is shown that if trees differ only in site value, then in the competitive equilibrium it is optimal to extract the last tree on a more valuable site before extracting the first tree on a less valuable site. It is also shown that if trees differ only in their initial age, then in equilibrium, it is optimal to extract the last older tree before extracting the first younger tree. In short, the inisights of Hotelling (1931) and Herfindahl (1967) are shown to extend. As the concluding section suggests, some of these results reappear in special cases of the model with replanting.     

The equilibrium price path of timber in the absence of replanting: does Hotelling rule the forests too?

Prior to 1985, virtually all analyses of forestry economics took the price of timber as given. Since Mitra and Wan (1985), however, the literature has sought to solve social planning problems where the price of timber, as reflected in the path of the marginal utility of consumption, is endogenous. The purpose here is to focus directly on the equilibrium price path of timber under the stringent assumption that once a site is cleared, no new tree is planted and the site is used for some other purpose with an exogenously specified value. While extreme, this assumption permits us to show that familiar results from the Hotelling literature have their counterparts in forestry economics. The paper begins by describing the equilibrium price path if all trees are the same age and sit on sites of equal value. This turns out to generate a U-shaped price path under some circumstances. Heterogeneity is then introduced. It is shown that if trees differ only in site value, then in the competitive equilibrium it is optimal to extract the last tree on a more valuable site before extracting the first tree on a less valuable site. It is also shown that if trees differ only in their initial age, then in equilibrium, it is optimal to extract the last older tree before extracting the first younger tree. In short, the inisights of Hotelling (1931) and Herfindahl (1967) are shown to extend. As the concluding section suggests, some of these results reappear in special cases of the model with replanting.     

The U.S. Department of Commerce’s approach to targeted dumping: the wrong test and the wrong response

The U.S. Department of Commerce (DOC) defines targeted dumping as a pattern of significant differences in the prices that importers charge in the U.S. to different purchasers, in different regions, or during different periods. If DOC finds targeted dumping, then it calculates the average dumping margin using zeroing, a practice that increases the calculated dumping duty. This article shows that DOC is using an inappropriate statistical test in targeted dumping investigations. The article also shows that a finding of targeted dumping does not justify the use of zeroing, an inherently flawed methodology that DOC has discarded in cases without targeted dumping.     

The impact of product market competition on GDP per capita growth in the EU countries: does the model of capitalism matter?

This article assesses whether the intensity of product market competition is a factor affecting economic growth (measured by the growth rate of real GDP per capita) and whether this impact depends on the model of capitalism. The study covers the 1997–2015 period and all EU28 countries. Product market competition is measured by two types of variables: product market regulation indicators and the number of enterprises. New elements in the analysis include, among others, nonlinear impact and overlapping observations. The regression equations are estimated on the basis of Blundell and Bond’s GMM system estimator. The results generally indicate that stronger product market regulations (and theoretically lower product market competition) are linked with faster growth of output. However, the impact of product market competition on economic growth depends on the type of capitalism. For post-socialist countries, unlike the Western European model of capitalism, more regulation tends to reduce the rate of economic growth.     

Lending technologies,banking relationships,and firms’ access to credit in Italy: the role of firm size

This paper analyses the role of lending technologies and banking relationships on firms’ credit access in Italy. Using EFIGE firm-level data, we show that the depth and strength of firm–bank relationships have heterogeneous effects on credit demand and rationing probabilities depending on the size of the borrower. Multiple banking relationships alleviate financial constraints for small firms, while borrowing from a large number of lenders hinders access to credit for large companies. Small and medium-sized enterprises with a higher share of debt with the main bank have a lower probability of being credit denied, as debt concentration contributes to overcome the opacity problems typical of the SMEs. Long-lasting relationships, by reducing information asymmetries, significantly improve access to credit for small and large firms. Conversely, we find that medium-sized enterprises are more exposed to financing constraints as relationship duration increases, due to possible lock-in effects. Finally, firms maintaining banking relationships based on transactional technologies are more likely to be credit denied, while the use of relationship lending technologies improves credit availability for both small and large enterprises.     

Do Technological Conditions of Production Explain Industrial Growth? The Indian Manufacturing, 1998–1999 to 2007–2008

The paper tries to assess whether the technological conditions of production can explain the sluggishness in growth in Indian manufacturing industries reflected in a stagnant share in aggregate GDP. For this purpose, the returns to scale and elasticity of factor substitution are estimated for various two-digit manufacturing industries of India for the years 1998–1999 to 2007–2008 using the translog production function specification. Most of the previous research of this kind was undertaken by using either aggregate level time-series or state-wise aggregate cross-section data. The recent availability of factory (plant) level panel data has motivated us to re-estimate the parameters of the production function for the Indian manufacturing using factory-level data. Our results clearly indicate presence of significant scale economies. We observe that the capital-labour elasticity of substitution varies across industries, being a little above one or less than one in nearly half of the cases. A multiple regression analysis has been undertaken with the help of industry-level panel data for the years 1998–1999 to 2007–2008 to find out if the manufacturing growth rate is conditioned by the parameters of the production function. Our results indicate that production function parameters do exert an important influence on the rate of growth.

     

Bilateral capital flows and the exchange rate: The case of the U.S.A. vis-à-vis Canada,France, West Germany and the U.K.

After a preliminary test (with generally negative results) of the interest parity assumption, an eclectic portfolio adjustment approach, which determines an exchange pressures variable (under a régime of a managed float) is constructed, for bilateral comparisons between the United States and its major trading partners taken individually. This approach to bilateral capital flows and managed exchange rate determination appears to function reasonably well, as judged by the empirical results. Interestingly, factors specific to individual exchange markets appear to play important roles in explaining bilateral capital flows and cross exchange rates, which would not occur in a Walrasian world, with global market clearing.     

From Hero to Zero? The Role of the Euro in the Current Crisis: Theory and some Empirical Evidence

A simple theoretical model of monetary unification and data from 11 euro members are used to investigate the common currency’s role in the macroeconomic performance of these countries. Euro membership has been typically accompanied by lower (or steady) inflation, but also by higher business-cycle volatility. In addition, synchronization of cyclical output was substantially affected by the common currency only in Greece (where it declined considerably) and Finland and Ireland (where it increased). Consistent with the theoretical predictions, the empirical evidence shows a strong negative relationship between cyclical synchronizations and volatilities, which however is not much stronger under the euro than it was during the Maastricht period.     

Competitive balance versus competitive intensity before a match: is one of these two concepts more relevant in explaining attendance? The case of the French football Ligue 1 over the period 2008–2011

The aim of this article is to investigate the determinants of attendance at French football Ligue 1 matches over the period 2008–2011 with an emphasis on examining the effects of both competitive balance and intensity before a match. Competitive balance is measured by the point difference between the two teams concerned by a match in the championship. Competitive intensity is measured by the point difference for the home team in relation to ranks with sporting stakes. Results show that competitive balance has an insignificant impact whereas competitive intensity has a significantly positive impact. Implications are drawn.     

A critique of the paper by Kanabar,R. and Simmons,P. (2016), ‘To defer or not to defer? UK state pension and work decisions in a lifecycle model’, Applied Economics, 48, 58, 5699-5716

We suggest corrections to the paper by Kanabar and Simmons and provide analyses for deriving the internal rate of return arising from a UK state pension deferral decision and for an actuarially fair deferral scheme.