Levy Institute Publications
Strategic Analysis, April 2019 | April 2019 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro ZezzaAlthough the ongoing recovery is about to become the longest in the history of the United States, it is also the weakest in postwar history, and as we enter the second quarter of 2019, many clouds have gathered.
This Strategic Analysis considers the recent trajectory, the present state, and the future prospects of the US economy. The authors identify four main structural problems that explain how we arrived at the crisis of 2007–09 and why the recovery that has followed has been so weak—as well as why the prospect of a recession is increasingly likely.
The US economy is in need of deep structural reforms that will deal with these problems. This report analyzes a pair of policies that begin to move in that direction, both involving an increase in the tax rate for high-income and high-net-worth households. Even if the primary justification for these policies is not economic, this report shows that if such an increase in taxes is accompanied by an equivalent increase in government outlays, the redistributive impact will have a positive macroeconomic effect while moving the US economy toward a more sustainable future.Download:Associated Program:Author(s):Related Topic(s):
Strategic Analysis, November 2018 | November 2018 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro ZezzaThe Greek government has managed to exit the stability support program and achieve a higher-than-required primary surplus so as not to require further austerity measures to depress domestic demand. At the same time, the economy has started to recover, mainly due to the good performance of both exports of goods and tourism and modest increases in investment
In this report, we review recent developments in the determinants of aggregate demand and net exports, and provide estimates of two scenarios: one which assumes business as usual and the other an alternate scenario simulating the medium-term impact of an acceleration in investment.
We conclude with a discussion on the sustainability of Greek government debt, showing that it is crucial that the cost of borrowing remains below the nominal growth of national income.Download:Associated Program:Author(s):Related Topic(s):
Statement of Senior Scholar L. Randall Wray to the House Budget Committee, US House of Representatives
Testimony, November 20, 2019 | November 2019 | L. Randall Wray, Yeva Nersisyan
Reexamining the Economic Costs of DebtOn November 20, 2019, Senior Scholar L. Randall Wray testified before the House Committee on the Budget on the topic of reexamining the economic costs of debt:
"In recent months a new approach to national government budgets, deficits, and debts—Modern Money Theory (MMT)—has been the subject of discussion and controversy. [. . .]
In this testimony I do not want to rehash the theoretical foundations of MMT. Instead I will highlight empirical facts with the goal of explaining the causes and consequences of the intransigent federal budget deficits and the growing national government debt. I hope that developing an understanding of the dynamics involved will make the topic of deficits and debt less daunting. I will conclude by summarizing the MMT views on this topic, hoping to set the record straight."Download:Associated Program(s):Author(s):L. Randall Wray Yeva NersisyanRelated Topic(s):
Research Project Report, April 2018 | April 2018 | L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton
A Path to Full EmploymentDespite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.
The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.
Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.Download:Associated Program:Author(s):Related Topic(s):
Public Policy Brief No. 147, 2019 | March 2019 | Jan KregelAs global market integration collides with growing demands for national political sovereignty, Senior Scholar Jan Kregel contrasts two diametrically opposed approaches to managing the tensions between international financial coordination and national autonomy. The first, a road not taken, is John Maynard Keynes’s proposal to reform the postwar international financial system. The second is the approach taken in the establishment of the eurozone and the development of its settlement and payment system. Analysis of Keynes’s clearing union proposal and its underlying theoretical approach highlights the flaws of the current eurozone setup.Download:Associated Program(s):Author(s):Related Topic(s):
Public Policy Brief No. 146, 2018 | August 2018 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila
Post-2000 Trends in the United StatesAjit Zacharias, Thomas Masterson, and Fernando Rios-Avila update the Levy Institute Measure of Economic Well-Being (LIMEW) for US households for the period 2000–13. The LIMEW—which comprises base income, income from wealth, net government expenditures, and the value of household production—is aimed at achieving a more comprehensive understanding of trends in living standards. This policy brief analyzes developments during this period at all levels of the LIMEW distribution, with a particular focus on the significant role played by net government expenditures. The overall trend for 2000–13 was one of historic stagnation in the growth of economic well-being for US households, but an examination of the different components of the measure reveals significant shifts taking place behind this headline trend.
A companion document, the Supplemental Tables, features additional data referenced in the policy brief.
Details about the sources of data and methods used to construct the estimates in this policy brief are discussed in Levy Institute Working Paper No. 912.Download:Associated Program(s):Author(s):Related Topic(s):
Research Project Report, September 2019 | September 2019 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila, Michalis Nikiforos, Kijong Kim, Tamar Khitarishvili
A Macro-Micro Policy Model for Ghana and TanzaniaFeminist economics has long emphasized the role of physical and social infrastructure as determinants of the time women spend on household production (the provision of unpaid domestic services and care). Surprisingly, there is a lack of studies that directly investigate how infrastructure improvements affect the time spent on household production and commuting to work, which is another important unpaid activity for most employed individuals. We attempt to fill the lacunae in the research by studying this issue in the context of Ghana and Tanzania utilizing the framework of the Levy Institute Measure of Time and Income Poverty. Separately, while there are several studies (including those done previously at the Levy Institute) on the macroeconomic impacts of government expenditures on care, these assessments tend to be based primarily on employment multipliers along with simple macroeconomic assumptions. We develop a disaggregated and fully articulated macroeconomic model based on the social accounting matrices for the two countries to take account of the intersectoral linkages and external constraints, such as balance of payments, that are particularly important for many developing nations, including Ghana and Tanzania. The macro- and microeconomic aspects are integrated in a unified analytical framework via a top-down disaggregated macroeconomic model with microsimulation that is novel in that it enables the investigation of the gendered economic processes and outcomes at the macroeconomic and microeconomic levels.
Download:Associated Program:Author(s):Ajit Zacharias Thomas Masterson Fernando Rios-Avila Michalis Nikiforos Kijong Kim Tamar KhitarishviliRelated Topic(s):
Research Project Report, February 2018 | February 2018 | Scott Fullwiler, Stephanie A. Kelton, Catherine Ruetschlin, Marshall SteinbaumAmong the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.
The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.
The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.
Download:Associated Program(s):Author(s):Scott Fullwiler Stephanie A. Kelton Catherine Ruetschlin Marshall SteinbaumRelated Topic(s):
Policy Note 2019/2 | May 2019 | Jan KregelAgainst the background of an ongoing trade dispute between the United States and China, Senior Scholar Jan Kregel analyzes the potential for achieving international adjustment without producing a negative impact on national and global growth. Once the structure of trade in the current international system is understood (with its global production chains and large imbalances financed by international borrowing and lending), it is clear that national strategies focused on tariff adjustment to reduce bilateral imbalances will not succeed. This understanding of the evolution of the structure of trade and international finance should also inform our view of how to design a new international financial system capable of dealing with increasingly large international trade imbalances.Download:Associated Program(s):Author(s):Related Topic(s):
Policy Note 2019/1 | April 2019 | Paolo SavonaWhile a consensus has formed that the eurozone’s economic governance mechanisms must be reformed, and some progress has been made on this front, what has been agreed to so far falls short of what is needed to address the central imbalances caused by the eurozone setup, according to Paolo Savona.
The key elements that are missing from the current package of reforms are interrelated: a common insurance scheme for bank deposits, the possible regulation of banks’ sovereign exposure, and the existence of a common safe asset. Savona outlines a proposal to increase the supply of safe assets provided by a common European issuer (the European Stability Mechanism) and explains how the plan could be made economically and politically satisfactory to all member states while facilitating progress on the deposit insurance and sovereign exposure issues.Download:Associated Program(s):Author(s):Paolo SavonaRelated Topic(s):
One-Pager No. 60 | July 2019 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro ZezzaSenators Elizabeth Warren and Bernie Sanders, along with Representative Alexandria Ocasio-Cortez, recently proposed to increase the rate of taxation on very high incomes and net worth. One of the primary justifications for such policies is that reducing inequality would help safeguard political equality. However, Dimitri B. Papadimitriou, Michalis Nikiforos, and Gennaro Zezza show how these tax policies, if matched by comparable increases in government spending, have the potential to boost aggregate demand while helping reform the unstable structure of the US economy.Download:Associated Program:Author(s):Related Topic(s):
One-Pager No. 58 | November 2018 | Joel Perlmann
What's New?The Trump administration is facing a legal challenge to its efforts to add a citizenship question to the 2020 decennial census—a question that was first included in 1890, but has not been asked of the entire population since 1950. If the citizenship question was asked in the past, why not reinstate it? Senior Scholar Joel Perlmann explains how the characteristics of both immigration and the census itself have changed radically since 1890 and, as a result, how the inclusion of this question on the once-a-decade census would not only be redundant, but would threaten the integrity of the census count.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 940 | November 2019 | Michalis Nikiforos
A Rejoinder and Some CommentsThe critique by Gahn and González (2019) of the conclusions in Nikiforos (2016) regarding what data should be used to evaluate whether capacity utilization is endogenous to demand is weak for the following reasons: (i) The Federal Reserve Board (FRB) measure of utilization is not appropriate for measuring long-run variations of utilization because of the method and purpose of its construction. Even if its difference from the measures of the average workweek of capital(AWW) were trivial, this would still be the case; if anything, it would show that the AWW is also an inappropriate measure. (ii) Gahn and González choose to ignore the longest available estimate of the AWW produced by Foss, which has a clear long-run trend. (iii) Their econometric results are not robust to more suitable specifications of the unit root tests. Under these specifications, the tests overwhelmingly fail to reject the unit root hypothesis. (iv) Other estimates of the AWW, which were not included in Nikiforos (2016) confirm these conclusions. v) For the comparison between the AWW series and the FRB series, they construct variables that are not meaningful because they subtract series in different units. When the comparison is done correctly, the results confirm that the difference between the AWW series and the FRB series has a unit root. (vi) A stationary utilization rate is not consistent with any theory of the determination of capacity utilization. Even if demand did not play a role, there is no reason to expect that all the other factors that determine utilization would change in a fashion that would keep utilization constant.Download:Associated Program(s):Author(s):Related Topic(s):
Working Paper No. 939 | October 2019 | Srinivas Raghavendra, Kijong Kim, Sinead Ashe, Mrinal Chadha, Felix Asante, Petri T. Piiroinen, Nata Duvvury
The Case of GhanaViolence against women and girls (VAWG) is a widely recognized human rights violation with serious consequences for the health and well-being of women and their families. However, the wider ramifications of VAWG for businesses, communities, economies, and societies are only recently being recognized. Despite this recognition, there are few studies exploring how the economic and social impacts of VAWG affect economic growth, development, and social stability. In this paper, applying the social accounting approach, we outline the ripple effects of VAWG from the individual micro-level impacts to the macroeconomy. Our analysis shows the loss due to VAWG amounts to about 0.94 percent of Ghanaian GDP and is a permanent invisible leakage from the circular flow of the economy. The analysis also shows that the loss due to violence is not just a one-off leakage from the macroeconomic circular flow and explores the potential consequences of the multiplier loss due to VAWG over a period of time. The cumulative loss is sizeable and inflicts a premium on GDP growth over time—in simple terms, inaction today in addressing VAWG for cost considerations will impose a larger cost premium on economic growth, which will constrain tomorrow’s resources.Download:Associated Program(s):Author(s):Srinivas Raghavendra Kijong Kim Sinead Ashe Mrinal Chadha Felix Asante Petri T. Piiroinen Nata DuvvuryRelated Topic(s):
Book Series, March 2018 | March 2018 | Jan Kregel
Edited by Marcella Corsi, Jan Kregel, and Carlo D'IppolitiEdited by Marcella Corsi, Sapienza University of Rome, Levy Institute Director of Research Jan Kregel, and Carlo D’Ippoliti, Sapienza University of Rome, this new collection of 16 essays is dedicated to Alessandro Roncaglia and deals with the themes that “have characterized his work or represent expressions of his personality, his interests and method," particularly his contributions to the interpretation of classical political economists as a means for informing present-day policy.
Published by: Anthem Press
Volume 28, No. 3 | September 2019 | Elizabeth Dunn, Michael StephensThis issue of the Summary features a Strategic Analysis identifying the four main structural problems for the US economy and how the feedback effects between them explain the 2007–9 crisis and account for the weak recovery that followed, as well as offering an estimate of the macroeconomic benefits of recent proposals designed to reduce inequality through changes in tax policy. Two policy notes explore the reform of the international financial system undertaken to address global imbalances, and present a proposal to increase the supply of safe European assets to remedy imbalances inherent in the eurozone setup.
Working papers included in this issue estimate the costs of the Green New Deal in terms of resource requirements; examine the spread between 10-year Treasury notes and the federal funds rate to gain a better understanding of when to reduce interest rates to prevent recessions; extend the concept of “shifting involvements” to the relationship between capital and labor to ascertain its effects on distribution and growth; consider the basic principles behind our understanding of money and how to apply them to money’s democratization; focus on fiscal policy’s role in stabilization following a shock; trace the evolution of China’s monetary policy framework to assess the effects of recent reforms; outline experiments with economic planning in the United States and France in the early 20th century to determine their applicability in modern capitalist societies; evaluate the effects of the education-occupation mismatch on both employees and employers; assess obesity’s impact on wages; and investigate changes in inequality in the United States using recentered influence functions.
Program: The State of the US and World Economies
- DIMITRI B. PAPADIMITRIOU, MICHALIS NIKIFOROS, and GENNARO ZEZZA, Can Redistribution Help Build a More Stable Economy?
- JAN KREGEL, Global Imbalances and the Trade War
- PAOLO SAVONA, A Proposal to Create a European Safe Asset
- L. RANDALL WRAY and YEVA NERSISYAN, How to Pay for the Green New Deal
- HAROLD HASTINGS, TAI YOUNG-TAFT, and THOMAS WANG, When to Ease Off the Brakes (and Hopefully Prevent Recessions)
- MICHALIS NIKIFOROS, Induced Shifting Involvements and Cycles of Growth and Distribution
Program: Monetary Policy and Financial Structure
- JAN KREGEL, Democratizing Money
- PLAMEN NIKOLOV and PAOLO PASIMENI, Fiscal Stabilization in the United States: Lessons for Monetary Unions
- ZENGPING HE and GENLIANG JIA, An Institutional Analysis of China’s Reform of their Monetary Policy Framework
- FERNANDO CARDIM DE CARVALHO, Economic Planning under Capitalism: The New Deal and Postwar France Experiments
Program: Employment Policy and Labor Markets
- FERNANDO RIOS-AVILA, It Pays to Study for the Right Job: Exploring the Causes and Consequences of Education-Occupation Job Mismatch
Program: Distribution of Wealth and Income
- FERNANDO RIOS-AVILA, A Semi-Parametric Approach to the Oaxaca-Blinder Decomposition with Continuous Group Variable and Self-Selection
- FERNANDO RIOS-AVILA, Recentered Influence Functions in Stata: Methods for Analyzing the Determinants of Poverty and Inequality
Download:Author(s):Elizabeth Dunn Michael Stephens
- Workshop: Gender and Macroeconomics
Current Research Topics
From the Press Room
Senior Scholar L. Randall Wray testified before the House Committee on the Budget, November 20.
OpEd: Don’t let politics derail Greece’s economic recovery
Fed's Bullard says economic data should improve, yield curve steepen in coming months
Financial market 'pause party' makes Fed rate cut less likely
Levy Institute President Dimitri B. Papadimitriou Addresses Mexican Congress on National Development Banks as an Instrument of Growth
The Rock-Star Appeal of Modern Monetary TheoryThe Sanders generation and a new economic idea
Minsky's MomentThe second in a series of articles on seminal economic ideas looks at Hyman Minsky’s hypothesis that booms sow the seeds of busts.