EVALUATING CHANGES IN THE DISTRIBUTION OF CAPITAL WEALTH

A small-scale general equilibrium model in which the distribution of capital wealth is a key parameter is employed to examine the potential economic consequences of greater capital wealth equality. Every performance indicator examined – aggregate income, consumption equality, social welfare in the sum-of-utilities sense, and aggregate saving –is improved by greater capital wealth equality. However, the bottom-line social welfare gain, relative to the present high-inequality situation – even from the maximum achievable level of complete equality in capital wealth distribution – would be numerically rather modest.     

EQUIPMENT AND STRUCTURES CAPITAL: ACCOUNTING FOR INCOME DIFFERENCES

In this article, I present comparable measures of equipment capital and structures capital stocks for 119 countries. Cross‐country variation in equipment capital‐output ratio is over twice the variation in structures capital and aggregate physical capital. The dispersion in equipment capital has also increased overtime. Using development accounting that incorporates equipment and structures capital, I offer evidence relevant to the debate on the importance of productivity versus factors in accounting for income differences. The new measures of heterogeneous capital reduce the burden on total factor productivity by up to 5%. (JEL O11, O47, E22)     

Measuring social capital accumulation in rural development

Using a theoretical framework, the study proposes an index that can measure the social capital of local action group (LAG) projects. The index is founded on four indicators: number of ties, bridging social capital, recognition, and diversity, which are aggregated into one social capital index. The index has been tested in LAG-Djursland, Denmark, and the study further investigates whether the organisational affiliation, project financing, and LAG co-financing can explain the degree of social capital accumulation. Furthermore, the author has tested if there are connections between motivation for pursuing development projects similar to those implemented previously and the degree of social capital. The paper concludes that there are indications that projects hosted by municipalities tend to show the most social capital, there is no connection between the amount of project financing and social capital, and a high level of motivation leads to increased social capital.     

INFLATION AND THE ACCUMULATION OF ASSETS IN PRIVATE PENSION FUNDS*

The effect of inflation on asset accumulation in private pension funds is analyzed using a stock adjustment model which incorporates nonbehavioral saving. Nonbehavioral saving (such as capital gains) occurs with considerably lower adjustment cost than behavioral saving. The regressions using time series data suggest that inflation has a large negative effect on aggregate funded pension saving. This effect is apparently not due to a behavioral adjustment to changed relative rates of return, but is primarily due to capital losses. The effect is larger the higher the proportion of pension fund holdings in corporate equities.     

Social Capital and economic opportunities

Moving on from [Coleman, J.S., 1990. Foundations of Social Theory. Belknap Press of Harvard University Press, Cambridge, MA, London] and [Putnam, R.D., Leonardi, R., Nanetti, R.Y., 1993. Making Democracy Work Civic Traditions in Modern Italy. Princeton University Press, Princeton, NJ, Chichester], an ever-growing literature claims that repeating trustful interactions in the economy do sediment in higher levels of generalized trust. This aggregate stock of trust is then named Social Capital and treated as an input in the aggregate production function, such as labour, physical capital, or human capital. In this paper we argue that in many instances there is no need for meta-concepts like Social Capital, as trust is often simply the outcome of profit maximization. Whilst approaches that refer to Social Capital ignore the set of economic opportunities, incentives and conflicts behind trust, in this article we propose a simple model to show that when these are taken into account, the roles of trust and Social Capital can be better defined and understood.     

Social capital in Croatia: measurement and regional distribution

By using partial least squares path modeling, this paper develops a complex index of social capital, selects Croatia as the case for testing and validating the index, and investigates the regional distribution of social capital. The social capital index is defined as a complex hierarchical structured construct of third-order with social trust, participation, and civism as its core dimensions. The main results indicate that civism is the most important cause of social capital followed by active participation and social trust. As far as the regional distribution of social capital is concerned, there are statistically significant differences across the Croatian regions. Although the lowest or below the national average level of social capital and its dimensions can be mostly found in the least developed regions (with the exception of the capital), the highest level of social capital and its particular dimensions is not achieved in the most developed regions.     

Structural versus nonstructural form of social capital: impact of ethnicity along caste and religious dimensions in Indian context

Despite much research work on the effect of social capital or the production of social capital along ethno-linguistic or racial dimensions, there is hardly any study in this line along the much fragmented character of Indian ethnicity. This article studies the impact of ethnicity along caste and religious dimensions on the growth of social capital in the Indian context. A simple theoretical model indicates that individual ethnicity formed out of individuals' separate pairwise connections with people, who are either of the same ethnic dimension or of different ethnic dimensions, is the only factor affecting endogenous social capital growth. Empirical results suggest that all forms of individual social capital are higher for people who are of the same caste or religion. It also shows that individuals' ethnicity with the same caste or religion is the only factor influencing high performance on the productivity of aggregate social capital in general and nonstructural form of social capital in particular.     

BETWEEN SCYLLA AND CHARYBDIS: INCOME DISTRIBUTION,CONSUMER CREDIT,AND BUSINESS CYCLES

We introduce a macroeconomic model with heterogeneous households and an aggregate banking sector in order to analyze the impact of rising income inequality under different credit scenarios. Growing inequality produces debt‐led consumption boom dynamics when the banking sector is characterized by a lower capital requirement and a higher willingness to lend. Instead, when inequality rises but the banking sector is highly regulated, aggregate demand and output fall. Our results also yield new insights on the appropriate fiscal policy reaction to stabilize the economy: acting on the progressivity of the tax system seems more effective than a proactive countercyclical fiscal policy. (JEL C63, D31, E62, G01)     

Optimality of Investment under Imperfectly Enforceable Financial Contracts

We investigate the optimality of aggregate investment and its policy implications under an environment in which financial contracts are imperfectly enforceable. We show that too much investment occurs when the ratio of own capital to debt is smaller than the ratio of project returns in terms of future values across periods, and too low investment occurs otherwise. A subsidy (tax) on the risk-free interest income can close the over- (under-) investment gap, but this policy may not be welfare improving.     

Environmental governance in federal systems: the effects of capital competition and lobby groups

We argue that centralized and decentralized environmental governance yield equivalent environmental regulations. We model worker, environmental, and capital owner lobby groups that seek influence by offering political contributions. Worker lobbying in the decentralized case has an effect on environmental regulations identical to that of capital owner lobbying in the centralized case. This is because the aggregate effects of environmental regulations on income are equivalent under two institutional designs. Whereas workers carry the full burden in the decentralized case when capital competition occurs, the burden is shared with the capital owners in the centralized case. We present evidence consistent with our theory.     

FACTOR SUBSTITUTION, RATIONAL EXPECTATIONS, AND THE EFFECTS OF COMMODITY PRICE SHOCKS ON EMPLOYMENT AND INVESTMENT

Within an aggregate model with three inputs to production, the paper studies the effects of an increase in the price of one of the inputs, called commodities. No restrictions are placed on the production possibility constraint, and expectations are assumed to be formed rationally. After considering the effects on the demand for the two remaining inputs, labor and capital, the paper analyzes the effects on employment under a wage rigidity constraint. A dynamic formulation is used to analyze the effects on investment, which are found to depend weakly and sometimes perversely on partial substitution parameters.     

ENTRY AND EXIT,PRODUCT VARIETY,AND THE BUSINESS CYCLE

We study the stochastic behavior of a dynamic general equilibrium model with monopolistic competition. Each seller sells his product in the consumption goods as well as the investment goods market and has market power in both. Consumers derive utility from a constant elasticity of substitution (CES) aggregate of all the consumption goods and augment their capital stock by a CES aggregate of all the investment goods. We analyze the equilibrium of this economy allowing for an endogenous determination of the number of firms and therefore of products. The principal effect we wish to highlight is the endogenous propagation and magnification of technology and preference disturbances through product space variations. (JEL E32, D43, L16)     

GROWTH, WELFARE, AND THE SIZE OF GOVERNMENT

Using an endogenous growth model in which government purchases directly affect aggregate productivity and utility, fiscal policy experiments conducted here indicate that the macroeconomic effects of changes in fiscal policy are at least as sensitive to the mix of spending cuts as they are to the mix of tax cuts. In fact, reducing the size of the government actually reduces growth and welfare freductions in government expenditures are heavily weighted towards reductions in public capital or if the proceeds are not used to reduce capital taxation. In addition, across-the-board spending cuts are not likely to significantly improve growth and welfare. ( JEL E62, 041)     

ON LABOR'S RIGHT TO STRIKE

This paper first shows that, under certain conditions, strikes benefit capital at the expense of union labor in the aggregate. It is then argued that observed variations in strikes and labor's right to strike are largely explainable by variations in the profitability of strikes to capital and not explainable by popular alternative hypotheses purporting to explain the existence of strikes. Finally, an explanation is offered for the persistence of labor's right to strike over time and across various political systems.     

Social capital as social relations: the contribution of normative structures

This paper presents a framework for social capital that highlights the normative structures through which it is manifested. The primary focus is on the ways that norms structure the relationships in which social capital is embedded. To this end, we introduce four types of normative structures which condition social capital: market, bureaucratic, associative, and communal. A field site in Japan is used to illustrate how different aspects of social capital interact. This case analysis also serves to make an important distinction between the availability and use of social capital. The central arguments are that 1) social capital is organized in different ways by the normative structures in which it is embedded; 2) there are important interactions between these different aspects of social capital that are often overlooked by simpler frameworks; 3) a useful distinction can be made between available social capital and used social capital; 4) access to social capital can be used to analyze power relations; and 5) distinguishing different aspects of social capital makes areas visible that are overlooked by other understandings of social capital. We conclude by identifying the utility of our perspective for informing public policy and guiding future research.     

Capitals, assets, and resources: some critical issues

This paper explores the potential of Bourdieu's approach to capital as a way of understanding class dynamics in contemporary capitalism. Recent rethinking of class analysis has sought to move beyond what Rosemary Crompton (1998) calls the 'employment aggregate approach', one which involves categorizing people into class groups according to whether they have certain attributes (e.g. occupations). Instead, recent contributions by Pierre Bourdieu, Erik Wright, Aage Sorensen, and Charles Tilly have concentrated on understanding the mechanisms that produce class inequalities. Concepts such as assets, capitals and resources (CARs) are often used to explain how class inequalities are produced, but there remain ambiguities and differences in how such terms are understood. This paper identifies problems faced both by game theoretical Marxism and by the rational choice approach of Goldthorpe in developing an adequate approach to CARs. It then turns to critically consider how elements of Bourdieu's approach, where his concept of capital is related to those of habitus and field, might overcome these weaknesses. Our rendering of his arguments leads us to conclude that our understanding of CARs might be enriched by considering how capital is distinctive not in terms of distinct relations of exploitation, but through its potential to accumulate and to be converted to other resources. This focus, we suggest, sidesteps otherwise intractable problems in CAR based approaches.     

AGGREGATE PRICE SHOCKS AND FINANCIAL INSTABILITY: A HISTORICAL ANALYSIS

This article presents evidence on the relationship between price and financial stability. We construct an annual index of financial conditions for the United States, 1790–1997, and estimate the effect of aggregate price shocks on the index using a dynamic ordered probit model. We find that price-level shocks contributed to financial instability during 1790–1933 and that inflation rate shocks contributed to financial instability during 1980–97. The size of the aggregate price shock needed to alter financial conditions depends on the institutional environment, but we conclude that a monetary policy focused on price stability would contribute to financial stability.     

School-based parental involvement as a predictor of achievement and school learning environment: An elementary school-level analysis

Recent federal and state policies promote school-level parent involvement (PI) (e.g., volunteering), although evidence linking it to both student-level academic performance and school-level outcomes is thin. Using social capital theory and drawing upon a longitudinal sample of public schools (n = 914) from the Early Childhood Longitudinal Study–Kindergarten Cohort (ECLS-K), we examine the relationship of school-level student achievement and the school learning environment to three forms of school-level PI: involvement directed toward school improvement (public-good PI); involvement directed toward parents' own children's schooling (private-good PI); and the formation of social networks among parents (networking). Multilevel modeling analyses revealed that schools characterized by high aggregate levels of parents' public-good PI (participation in PTA/PTO, volunteering, and fundraising) and networking were more likely than other schools to have higher percentages of students at or above national/state standards in math and reading achievement and more likely to show more positive learning environments. School-level socio-economic status (SES) moderated these effects such that aggregate private-good PI and networking related to more positive learning environments and higher school achievement in low-SES schools while aggregate public-good PI brought more benefit within high-SES schools.     

Measuring the effect of spell recurrence on poverty dynamics—evidence from Spain

Accounting for the time individuals spend below the poverty line is an important dimension in order to design social policies to fight against poverty. The literature is currently aiming to construct a consistent aggregate measure of poverty over time that takes into account individual income lifetime profiles. It is however, far from clear which aspects of the specific patterns of poverty spells should be included. Using longitudinal data for Spain, this paper shows that the effect of spell recurrence on poverty dynamics is relevant. Poverty exit and re-entry rates vary not only with personal or household characteristics but also with spell accumulation and the duration of current and past spells. In general, our main findings support that an aggregate intertemporal poverty index should incorporate full individual poverty lifetime trajectories accounting for both poverty and non-poverty spell durations.     

Social network structure and the trade-off between social utility and economic performance

We put forward a computational multi-agent model capturing the impact of social network structure on individuals’ social trust, willingness to cooperate, social utility and economic performance. Social network structure is modeled as four distinct social capital dimensions: degree, centrality, bridging and bonding social capital. Model setup draws from socio-economic theory and empirical findings based on our novel survey dataset. Results include aggregate-level comparative statics and individual-level correlations. We find, inter alia, that societies that either are better connected, exhibit a lower frequency of local cliques, or have a smaller share of family-based cliques, record relatively better aggregate economic performance. As long as family ties are sufficiently valuable, there is a trade-off between aggregate social utility and economic performance, and small world networks are then socially optimal. We also find that in dense networks and trustful societies, there is a trade-off between individual social utility and economic performance; otherwise both outcomes are positively correlated in the cross section.