Theory and Practice of Crisis in Political Economy: The Case of the Great Recession in Spain

This paper addresses Marx’s theory of crisis in order to analyze the Great Recession in Spain, a peripheral economy within the Eurozone. It demonstrates that underlying the problem of the “housing bubble” is an incapacity to generate surplus value, which in turn explains certain particularities related to capital composition, productivity, wages, and finance. The article further carries out a critique of both orthodox and heterodox approaches that focus on (1) profit squeeze caused by labor market rigidities, (2) underconsumption due to stagnant wages, and (3) finances, interest rates, and indebtedness JEL classification: B14, E11, E20, E43, J30

Resource Misallocation in India

At the macro level, productivity is driven by technology and the efficiency of resource allocation, as outcomes of firms’ decision making. The relatively high level of resource misallocation in India’s formal manufacturing sector is well documented. We build on this research to further investigate the drivers of misallocation, exploiting micro-level variation across Indian states. We find that states with less rigid labor markets have lesser misallocation. We also examine the interaction of labor market rigidities with informality which is a key feature of India’s labor markets. Our results suggest that reducing labor market rigidities in states with high informality has a net positive effect on aggregate productivity.

Winners and loser of trade liberalization: frictions, rigidities and reforms

Trade liberalization brings economic gains to the economy due to efficiency improvements and lower prices. The gains, however, may not be for everybody: export sectors win and import sectors lose. This creates a distributional conflict. The gains and losses from trade, and the attendant conflict, evolve as the economy adjusts. This depends on capital and labor market rigidities. There is room for policies to help realize and enhance the gains from trade and to mitigate the losses.

Do Labor Market Imperfections Increase Trade Protection? A Theoretical Investigation

Labor market imperfections are commonly believed to be a major reason for imposing trade impediments. In this paper, I introduce labor market rigidities that are prevalent in continental European countries into the well-known protection for sale model proposed by Grossman and Helpman (1994). I show that contrary to commonly held views, imperfections in the labor market do not necessarily increase equilibrium trade protection. A testable equilibrium trade protection equation is also derived. The findings in this paper are hence particularly relevant for empirical tests of trade policy determinants in economies with more regulated labor markets.