DISEQUILIBRIUM EXCHANGE IN BARTER AND MONETARY ECONOMIES

This article compares the relative performances of barter and monetary arrangements at fixed disequilibrium prices. The decentralized functioning of the two systems is described, and their "fix-price" equilibria compared. It is shown that, while the fix-price equilibria will be more difficult to obtain in the barter economy, they are more efficient than in the monetary economy where disequilibrium "effective demand failures" appear.     

CONSPICUOUS SPENDING AND THE INCOME DISTRIBUTION OF SOCIAL GROUPS

Using South African household expenditure data, we analyze how the spending of a household on visible goods, such as jewelry and clothes, depends on the distribution of income within its social group. We find that this spending is positively correlated with the share of peers who possess a similar income level to the household, what we dub the “local income share.” Moreover, we find that the spending of a household on visible goods is positively correlated with the average income of peers that are poorer than this household. We interpret this as evidence for cascade effects through which income changes among the poorest in the social group can trigger adjustments in the visible spending patterns of the wealthy. In line with previous research (Charles et al. 2009), we also find that visible spending of a household is negatively correlated with the average income of its social group. We present a simple model of status competition based on Hopkins and Kornienko (2004) that synthesizes these effects and can account for our results. (JEL D12, D31, O12)     

FACTOR INCOME DISTRIBUTION AND ENDOGENOUS ECONOMIC GROWTH: PIKETTY MEETS ROMER

What is the relationship between the economy's long-run growth rate, its capital-income ratio, and its factor income distribution? A satisfactory answer requires an endogenous growth and savings rate. We scrutinize Piketty's (2014) theory in a richly parameterized variant of Romer's (1990) seminal model with and without population growth. The economy's growth and savings rate are exogenous in Piketty's theory and endogenous in Romer's. In contrast to Piketty's Second Fundamental Law of Capitalism a smaller growth rate may be associated with a smaller capital-income ratio. Moreover, it may go together with a greater or a smaller capital share. (JEL E10,E21,E25,O33,O41)     

FISCAL DECENTRALIZATION AND ECONOMIC GROWTH: SPENDING VERSUS REVENUE DECENTRALIZATION

This article examines whether the efficiency gains accompanying fiscal decentralization generate higher growth in more decentralized economies, applying pooled‐mean group techniques to a panel dataset of 23 Organization for Economic Co‐operation and Development (OECD) countries, 1972–2005. We find that spending decentralization has tended to be associated with lower economic growth while revenue decentralization has been associated with higher growth. Since OECD countries are substantially more spending than revenue decentralized, this is consistent with Oates' (1972) hypothesis that maximum efficiency gains require a close match between spending and revenue decentralization. It suggests reducing expenditure decentralization, and simultaneously increasing the fraction financed locally, would be growth‐enhancing. (JEL E62, H71, H72)     

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)     

DECENTRALIZATION AND PARTICIPATORY SERVICE DELIVERY

User participation has been promoted to improve the quality, responsiveness, and outreach of public services in India. This qualitative study evaluates new grassroots institutions—Village Education Committees and Mothers’ Committees—in Andhra Pradesh, which promoting parents’ participation in the management and monitoring of local schools and maternal/child health services. Although the committees were found to have increased participation in public affairs by the poor and brought about some improvements in service quality, inclusive and meaningful participation has often been hindered by illiteracy and lack of information, as well as caste, gender, and socioeconomic inequalities. The article suggests that there are considerable tensions between inclusive participation and committee effectiveness as members need skills, status, and resources in order to have a meaningful impact on service provision. In addition, research findings point to the need for more structured opportunities for committee members to interact with authorities and service providers, as well as for children to voice their concerns and ideas. Lastly, in order to tackle childhood poverty more holistically, the focus of these committees should be revised to give greater emphasis to improving service quality improvements and cross-sectoral synergies, rather than the current move narrow focus on infrastructural development and singlesector initiatives.     

THE TIMING OF MARKETS AND MONETARY TRANSFERS IN CASH-IN-ADVANCE ECONOMIES

In cash-in-advance models, do the timing of markets and the timing of the monetary transfer affect equilibrium money demand? The timing of markets generates different individual money demands; however, under the common assumption that agents are identical, these differences do not affect the behavior of equilibrium real balances. In contrast, the timing of the monetary transfer has important implications for agent's information sets; these implications can influence the equilibrium characteristics of real balances.     

LABOR MARKET SEGMENTATION AND INCOME DETERMINATION IN POLAND

The model of income determination, as introduced by labor market segmentation students, is applied to Polish data. This article argues that divisions between sectors, industries, branches, and enterprises, imposed institutionally by the Polish central management system, determine dimensions of labor market segmentation in Polish society. Research findings demonstrate a substantive effect of economic segmentation dimensions on income inequalities, with industrial divisions affecting income variation the most strongly. The second stage of anaysis shows substantive differences in the process of income determination between five industries. This article argues that industrial differentials cannot be explained away by differences in labor force composition and that there are substantial variations in how worker characteristics are rewarded. The results are interpreted as evidence of the effect of labor market segmentation on social inequalities in Poland. In addition, differences in structural mechanisms of segmentation between Poland and capitalist societies are noted.     

ECONOMIES OF SCALE IN BANKING,INDETERMINACY, AND MONETARY POLICY

This paper investigates economies of scale (ES) in financial intermediation as a source of equilibrium indeterminacy. Financial intermediation is embedded into a standard flexible‐price monetary model, and provides deposits (inside money) that substitute with currency to purchase consumption. The results indicate that equilibrium indeterminacy does not depend on a large degree of ES in intermediation nor a large intermediation sector, but on monetary policy and the determination of nominal interest rates. Monetary policies not targeting nominal rates allow for indeterminacy to arise for any positive degree of ES, while policies targeting nominal rates eliminate indeterminacy for all degrees of ES. (JEL C62, E44, E52)     

FIAT EXCHANGE IN FINITE ECONOMIES

The state of the art of rendering fiat money valuable is either to impose a boundary condition or to make the boundary condition unimportant through an infinite sequence of markets so as to circumvent backward induction. We show fiat exchange may nevertheless arise in finite economies if agents have incomplete information about their relative position in the trade cycle or when the barter and autarky equilibria of the one-shot trading round support a monetary equilibrium with repeated trades.     

INTERNATIONAL R&D SPILLOVERS AND PRODUCTIVITY TRENDS IN THE ASIAN MIRACLE ECONOMIES

This paper examines the importance of the domestic research and development stock and foreign knowledge spillovers on total factor productivity for six Asian miracle economies over the period from 1955 to 2006. The productivity effects of international knowledge spillovers through the following channels are considered: imports, exports, inward foreign direct investment, patents, geographical proximity, and the general channel. The general channel is a transmission mechanism where knowledge spillovers occur automatically and do not pass through any specific channel. The estimates show that knowledge has been transmitted through all the channels considered but that the import channel and the general channel have probably been the most important ones for the Asian miracle economies. (JEL O10, O30, O40)     

LABOR MARKET SEGMENTATION AND INCOME INEQUALITY IN URBAN CHINA

Though central to the market transition debate, the effect of the institutional realignment on stratification order has not been adequately addressed. I reformulate market transition hypotheses and use data from a recent survey in a Chinese city to test market transition theory and path dependence arguments. I make the linkage between literatures on labor market segmentation and literatures on market transition. I show different returns to human and political capital in the private and state sectors in urban China. My research suggests modifications of the conceptual issues used in the market transition debate.     

AN EXPLORATORY MODEL OF THE SIZE DISTRIBUTION OF INCOME

Through a specific model, this paper explores a promising general framework for unified modelling of the size distribution of income and wealth. The specific model includes physical and human capital accumulation, factoral and size distribution effects, redistributive taxation, economic growth, and other distribution-related mechanisms. The main conclusion is that the general framework can accommodate a wide range of distributional phenomena and still remain analytically tractable. Specifically, the framework allows closed form analytic solution for the first two moments (mean vector and variance-covariance matrix) of the joint distribution over individuals of income, wealth, and other variables.     

DEPRECIATION IN PRODUCTION ANALYSIS AND IN INCOME AND WEALTH ACCOUNTS: RESOLUTION OF AN OLD DEBATE

In this article, I propose a resolution for the long-standing controversy over depreciation. I develop, from capital theory, income and wealth accounting capital concepts and compare them with those from production analysis and productivity measurement. I conclude that depreciation in economic accounts is exactly the same measurement as in production analysis. As for empirical implications, market-based measures of depreciation are appropriate for economic accounts, provided they are appropriate empirical measures of economic depreciation.