Economics Department Working Paper Series
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The Economics Department Working Paper Series is a pre-publication outlet for research produced by Department faculty and graduate students.
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Publication The Political Economy of Pragmatic Paranoia: The Strange Case of Pakistan(2024) Razmi, ArslanPakistan's political economy has been characterized by some interesting and arguably unique features in recent decades. The combination of two stands out, in particular: (1) lifetime uncertainty for elected governments, and (2) a high degree of certainty that, due to reasons that are largely extraneous to popularity and policy performance, the incumbent party will not form the government in the next term. This paper argues, employing modified formal frameworks developed for other con- texts, that these features go a significant way in explaining why the economy has experienced dramatic cyclical fluctuations in internal and external macroeconomic indicators, especially official foreign exchange reserve stocks. In addition, the analysis helps explain the consistent underinvestment in tax revenue-generation capacity. The existing "partisan" and "opportunistic" varieties of political business cycle models do not satisfactorily capture these features. The analysis, thus, extends this literature in new directions.Publication Is There a Tendency for the Rate of Profit to Fall? Econometric Evidence for the U.S. Economy, 1948-2007(2010) Basu, Deepankar; Manolakos, Panayiotis T.The law of the tendential fall in the rate of profit has been at the center of theoretical and empirical debates within Marxian political economy ever since the publication of Volume III of Capital. An important limitation of this literature is the absence of a comprehensive econometric analysis of the behaviour of the rate of profit. In this paper, we attempt to fill this lacuna in two ways. First, we investigate the time series properties of the profit rate series. The evidence suggests that the rate of profit behaves like a random walk and exhibits "long waves" interestingly correlated with major epochs of U.S. economic history. In the second part, we test Marx's law of the tendential fall in the rate of profit with a novel econometric model that explicitly accounts for the counter-tendencies. We find evidence of a long-run downward trend in the general profit rate for the US economy for the period 1948-2007.Publication Employment and Distribution Effects of the Minimum Wage(2010) Slonimczyk, Fabian; Skott, PeterThis paper analyzes the effects of the minimum wage on wage inequality, relative employment and over-education. Using an effciency wage model we show that over-education can be generated endogenously and that an increase in the minimum wage can raise both total and low-skill employment, and produce a fall in inequality. Evidence from the US suggests that these theoretical results are empirically relevant. The over-education rate has been increasing and our regression analysis suggests that the decrease in the minimum wage may have led to a deterioration of the employment and relative wage of low-skill workers.Publication Cyclical Patterns of Employment, Utilization and Profitability(2010) Zipperer, Ben; Skott, PeterThe interaction between income distribution, accumulation, employment and the utilization of capital is central to macroeconomic models in the `heterodox' tradition. This paper examines the stylized pattern of these variables using US data for the period after 1948. We look at the trends and cycles in individual time series and examine the bivariate cycical patterns among the variables.Publication A Concise History of Exchange Rate Regimes in Latin America(2010) Frenkel, Roberto; Rapetti, MartinThe paper analyzes exchange rate regimes implemented by the major Latin American countries since the Second World War, with special attention on the period of the second globalization process beginning in the 1970s. The analysis follows a historical narrative aiming to provide an understanding of the domestic and external circumstances in which various regimes were adopted. A simple conceptual framework is developed in order to emphasize how the exchange rate regime may affect key nominal and real variables in a small open economy. After an overview of the main trends followed by the major countries in the region over the last 60 years, the paper focuses on regimes that were implemented 1) with stabilization purposes (nominal anchors) and 2) with the aim of targeting the level of the real exchange rate. These two sections analyze in greater detail some experiences illustrating the pros and cons of both strategies. The paper closes with an assessment about exchange rate experiences in Latin America.