A SFC POLITICAL BUSINESS CYCLE: KALECKI’S 1943 MODEL REVISITED

<p align="center"><strong>ABSTRACT</strong><strong></strong></p><p>This paper features a stock-flow consistent (SFC) political business cycle model where the interplay between financial debt, income distribution and fiscal policy is politically mediated by the relative influence of workers and businesses over government policy and publicly provided goods. In countries where taxes are a politically costly alternative to generate fiscal revenue, debt finances fiscal expansionary activity to initially raise wages and increase output. However, institutional mechanisms keep such drivers in check, and prompt a stop-and-go cycle as Kalecki suggested in his landmark 1943 paper. We find that the push of labor interests against business stakeholders leads to non-linear dynamics over debt, deficits and long-term growth paths.</p><p> </p><p align="center">UN CICLO ECONÓMICO POLÍTICO CFC: REVISITANDO EL MODELO DE KALECKI DE 1943<strong></strong></p><p align="center"><strong>RESUMEN</strong><strong></strong></p><p>Este artículo presenta un modelo de ciclo económico-político consistente de flujo-cantidad (CFC) en el cual la interacción entre la deuda financiera, la distribución del ingreso y la política fiscal está mediada políticamente por la influencia relativa de los trabajadores y las empresas sobre la política del gobierno y los bienes públicos. En los países donde los impuestos representan una alternativa para generar ingresos políticamente costosa, la deuda financia la actividad fiscal expansionista para aumentar en primer término los salarios y el producto. Sin embargo, existen mecanismos institucionales que detienen estos motores e inducen un ciclo de interrupción y avance, tal como Kalecki sugirió en su innovador artículo de 1943. Encontramos que el ímpetu de los intereses de los trabajadores en contra de los empresarios conduce a una dinámica no lineal sobre las trayectorias de la deuda, los déficits y el crecimiento de largo plazo.</p>

Some (Largely) Ignored Problems With Privatization

More than efficiency and accountability are at stake in the decision to contract out publicly provided goods or publicly owned resources. This chapter makes the case for considering two other aspects of privatization: inequality and the erosion of public purposes. Moving a good or service out of the public sector can distort and fragment important public goals regarding that good or service, in part by changing the decision path by which that good or service is produced and distributed.

On Allocation Contests for Publicly Provided Goods

In many countries, the government provides goods and services that are rival in consumption—essential commodities, such as water, public transportation and basic health care, and merit goods like professional education and tertiary health care. For such goods, the government has to specify allocation rules under which citizens can access them. Affluent citizens often have the incentive and the ability to influence public allocation rules by engaging in allocation contests. This article presents simple models of allocation contests for a divisible essential commodity and an indivisible merit good, and studies contest equilibria and their implications for social outcomes. Given allocation contests over public provision, falling public supply of an essential commodity can have magnified negative impact on social welfare, and raising the reservation quota of a publicly provided merit good for a set of disadvantaged citizens might effectively lower their access to the good. JEL: C72, D61, H42

THE COGNITIVE TRANSITION IN MEXICO: ECONOMIC GEOGRAPHY AND LOCAL GOVERNANCE IMPACTS

This article shows that cognitive ability dynamics interact with both individual and local indicators of macroeconomic wellbeing, publicly provided goods and private goods, through 141 localities in Mexico. The link of these various goods with inequity is compared quantitatively using the concentration index decomposition. The set of individual characteristics including paternal and maternal cognitive ability, whether mother works, father’s schooling and household wealth, and the set of local characteristics including local economic activity, local public policy and local marginalization indicators, each have significant connections with the formation of cognitive ability. Living in a rural locality is associated with one fourth of inequities in cognitive ability. This is consistent with a model of human development and economic growth exhibiting aggregate macroeconomic channels through which economic geography and local governance can lead to stratification and divergence in welfare indicators. There is a long-term transition towards higher levels of cognitive ability that will take several generations to converge at the current rate.

The Relationship between Public Expenditure and Bureaucratic Quality: The Case of Eurasian Economies

One of the controversial issues among researchers in the field of public finance is estimating the determinants of public expenditures. It’s argued that public expenditure is determined by economic as well as demographic, social and political variables. One of the important element of political variables is bureaucracy. If bureaucracy, as one of the main actors of political decision making process, works in quality, effectiveness and efficiency would occur in publicly provided goods and services. In parallel with the good quality of bureaucracy, the size of state would become smaller. The purpose of this study is to test empirically between efficient bureaucracy and public expenditure, using dynamic panel data analysis of 6 Eurasian Economic Community countries from 1998 to 2011. This study finds evidence that existence of bureaucratic quality reduces the public expenditures.