Skott, Peter

Job Title

Professor, Department of Economics

Last Name

Skott

First Name

Peter

Discipline

Economics

Expertise

Macroeconomics; income distribution

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Now showing 1 - 10 of 37

Open Access
Public debt in an OLG model with imperfect competition
(2011-10) Skott, Peter; Ryoo, Soon
Fiscal policy is needed to avoid dynamic inefficiency and maintain full employment in a modified Diamond OLG model with imperfect competition. A distributionally neutral tax scheme can maintain full employment in the face of variations in .household confidence.. No variations in taxes will be needed if households correctly anticipate future taxes: the tax policy functions as an insurance scheme.
Open Access
Pluralism, the Lucas critique, and the integration of macro and micro
(2012-02) Skott, Peter
Mainstream macroeconomics has pursued .micro founded.models based on the explicit optimization by representative agents. The result has been a long and wasteful detour. But elements of the Lucas critique are relevant, also for heterodox economists. Challenging common heterodox views on microeconomics and formalization, this paper argues that (i) economic models should not be based purely on empirically observed regularities,(ii) heterodox economists must be able to tell an integrated story about goal-oriented micro behavior in a specific macro environment, and (iii)relatively simple analytical models have an essential role to play.
Open Access
Distributional biases in the analysis of climate change
(2011-10) Skott, Peter; Davis, Leila
The economic analysis of global warming is dominated by models based on optimal growth theory. These representative-agent models have an intrinsic distributional bias in favor of the rich. The bias is compounded by the se of revenue-neutrality in the allocation of emission permits. The result is mitigation recommendations that are biased downwards.
Open Access
Aggregate Demand, Functional Finance and Secular Stagnation
(2016) Skott, Peter
This paper makes three main points. Fiscal policy, first, may be needed in the long run to maintain full employment and avoid secular stagnation. If fiscal policy is used in this way, second, the long-run debt ratio depends (i) inversely on the rate of growth, (ii) inversely on government consumption, and (iii) directly on the degree of inequality. The analysis, third, suggests that policies and policy debates have been misguided. The recent rediscovery of ’secular stagnation’ by Summers and others should be welcomed, but the suggested theoretical redirection is unclear and does not go far enough.
Open Access
Aggregate Demand Policy in Mature and Dual Economies
(2019) Skott, Peter
Aggregate demand is important, both in the short and the long run, but a basic distinction must be made between dual and mature economies. Mature economies may suffer from a structural aggregate problem ('secular stagnation'): full-employment growth may be impossible in the absence of sustained fiscal stimulus. Dual economies with high levels of open or hidden unemployment, by contrast, do not face long-run structural aggregate demand problems. They require public investment in key areas, including education and infrastructure, but the key problems concern the composition of demand and the need to expand the modern sector. These economies face structural transformation problems.
Open Access
Credit Constraints and Economic Growth in a Dual Economy
(2017) Skott, Peter; Gómez-Ramírez, Leopoldo
Pervasive credit constraints have been seen as major sources of slow growth in developing economies. This paper clarifies a mechanism through which an inefficient financial system can reduce productivity growth. Using a two-sector model, second, we examine the implications for employment and the distribution of income. Both classical and Keynesian versions of the model are considered; saving decisions are central in the classical version while firms’ investment and pricing decisions take center stage in the Keynesian version. We find that, although boosting the asymptotic rate of growth, a relaxation of credit constraints may reduce the share of the formal sector, increase inequality and underemployment, and have little or no effect on the medium-run rate of growth.
Open Access
An empirical evaluation of three post Keynesian models
(2010-09) Skott, Peter; Zipperer, Ben
Structuralist and post Keynesian models differ in their assumptions about firms’ investment behavior and pricing/output decisions. This paper compares three benchmark models: Kaleckian, Robinsonian and Kaldorian. We analyze the implications of these models for the steady growth path and the cyclical properties of the economy, and evaluate the consistency of the theoretical predictions with empirical evidence for the US. Our regression results and the stylized cyclical pattern of key variables are consistent with the Kaldorian model. The Kaleckian investment function and the Robinsonian pricing behavior find no support in the data.
Open Access
Heterodox macro after the crisis
(2011-10) Skott, Peter
Macroeconomics is in crisis and this creates openings for alternative perspectives. The dominant heterodox traditions, however, have shortcomings that need to be addressed, both to improve our understanding of the real world and to take advantage of the opportunities offered by the irrelevance of most mainstream macro. This paper discusses three examples of areas that need attention: (i) investment functions (where popular specifications lack behavioral and empirical support), (ii) income distribution (where key developments have received little attention) and(iii) the relation between income inequality and financial markets (where extensions of existing models may help explain financial instability)
Open Access
Growth cycles in mature and dual economies
(2022) Skott, Peter
Mature economies may experience fluctuations, but the average medium and long run growth rate matches the natural rate. Like Kaldor's neo- Keynesian models, the Marx-Goodwin tradition explains this outcome by endogenizing the distribution of income and assuming that the accumulation of capital is increasing as a function of the profit share. The application of Goodwin cycles to developing economies may be hard to justify, however. The modified Goodwin models in this paper include relative-wage norms as a central element of wage formation. Norms change endogenously, leading to path dependence (hysteresis) in the stationary solution for the employment share of the modern sector. The effects of shocks - the sensitivity of the long-run outcome to initial conditions - may be amplified by non-linearities in the adjustment of wages to deviations of actual wages from the norm.
Open Access
Functional Finance and Intergenerational Distribution In a Keynesian OLG model
(2015) Skott, Peter; Ryoo, Soon
This paper examines the role of fiscal policy in the long run. We show that (i) dynamic inefficiency in a standard OLG model generates aggregate demand problems in a Keynesian setting, (ii) fiscal policy can be used to achieve full-employment growth, (iii) the required debt ratio is inversely related to both the growth rate and government consumption, and (iv) a simple and distributionally neutral tax scheme can maintain full employment in the face of variations in ‘household confidence’