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5591. The drivers of household indebtedness re-considered: an empirical evaluation of competing macroeconomic arguments on the determinants of household indebtedness in OECD countries

Author:
Glenn Lauren Moore and Engelbert Stockhammer
Publication Date:
02-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
Household debt is at a record high in most OECD countries and it played a crucial role in the recent financial crisis. Several arguments on the macroeconomic drivers of household debt have been put forward, and most have been empirically tested, albeit in isolation of each other. This paper empirically tests seven competing hypotheses on the macroeconomic determinants of household indebtedness together in one econometric study. Existing arguments suggest that residential house prices, upward movements in the prices of assets demanded by households, the income share of the top 1%, falling wages, the rolling back of the welfare state, the age structure of the population and the short-term interest rate drive household indebtedness. We formulate these arguments as hypotheses and test them for a panel of 13 OECD countries over the period 1993 - 2011 using error correction models. We also investigate whether effects differ in boom and bust phases of the debt and house price cycles. The results show that the most robust macroeconomic determinant of household debt is real residential house prices, and that the phase of the debt and house price cycles plays a role in household debt accumulation.
Topic:
Debt, Economics, Macroeconomics, Economic Cooperation, and Housing
Political Geography:
Global Focus

5592. Energy in Economic Growth: Is Faster Growth Greener?

Author:
Gregor Semieniuk
Publication Date:
04-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
An influential theoretical hypothesis holds that if aggregate productivity growth accelerates, then so does the decline in energy intensity. Whether faster growth is greener in this sense is crucial for modeling future growth and climate change mitigation, but empirical evidence is lacking. This paper characterizes the global, long-run historical relationship between changes in energy intensity and labor pro- ductivity growth rates. Basing estimates on an unbalanced panel of 180 countries for the period 1950-2014 and the world as a whole, it captures a significantly larger historical window than previous studies. The paper finds a stylized fact whereby the rate at which energy intensity changes is constant or even increases as labor productivity accelerates. Faster growth is not greener. This provides important new information for calibrating integrated assessment models, many of which make a green growth assumption in near term projections.
Topic:
Economics, Energy Policy, Economic Growth, Green Technology, and Renewable Energy
Political Geography:
Global Focus

5593. Governance and Land Reform in the Palm Oil Value Chain in the Philippines

Author:
Caroline Hambloch
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The chain literature (Global Commodity Chains/Value Chains/Production Networks) have remained surprisingly silent about the role of land as a factor of production. I use fieldwork experience from the palm oil industry in Agusan del Sur, Philippines to illustrate the way in which the buyer-driven nature of the chain interacts with a major institutional change, namely the redistributive land reform, Comprehensive Agrarian Reform Program (CARP). I argue that the CARP has not resulted in the desired redistribution of power from the landed to the landless, but reinforces the unequal distribution of power between plantation/milling companies and beneficiaries, producing economic and social downgrading trajectories for reform beneficiaries and farmworkers.
Topic:
Agriculture, Governance, Reform, Land, and Land Reform
Political Geography:
Asia and Philippines

5594. Financing Green Growth

Author:
Gregor Semieniuk and Mariana Mazzucato
Publication Date:
04-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper surveys the current state of financing green growth in the energy sector, based on the insight that there are different qualities of finance. In past transformational changes in other sectors, public monies played a key role across the innovation landscape. Public financing was central also in a number of past national energy transitions, as reviewed here for Iceland (from fossil to geothermal energy), Norway (from mainly non-electricity energy to hydroelectricity), France (from oil to nuclear) and the United States (from conventional to shale gas). In the current transition to low-carbon energy supplies, there is much public activity, most directed and concerted in China, but also reasons to doubt it is enough and applied in the right places to be able to finance the transition to a low carbon sector on time scales consistent with current climate change mitigation targets. A discussion of opportunities and challenges to a more central role for public financing concludes, drawing also on insights from the recent mission-oriented innovation literature.
Topic:
Energy Policy, Finance, Green Technology, and Renewable Energy
Political Geography:
China, Europe, Asia, France, North America, Iceland, and United States of America

5595. Too Much of a Good Thing? Speculative Effects on Commodity Futures Curves

Author:
Sophie van Huellen
Publication Date:
07-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The increasing inflow of institutional investors replicating broad based indices into commodity futures markets has been linked to excessive calendar spreads and anomalies in futures curves. At the same time, these investors have been welcomed as liquidity providers. This paper hypothesises that this apparent dissent can be reconciled by considering the relative size of index positions to hedging positions, rather than the presence of index traders alone. The hypothesis is tested empirically for three soft commodity markets: cocoa, coffee, and cotton. By use of factor decomposition, the paper shows empirically that (a) index and hedging positions have inverse and offsetting effects on futures curves, and (b) index positions, net of hedging positions, are associated with upward sloping and peaked futures curves and occasionally wave-like shapes linked to roll-effects. The paper concludes that index traders are welcomed liquidity providers but can become ‘too much of a good thing’ if exceeding hedgers’ demand for counterparty.
Topic:
Investment, Commodities, Fiscal Policy, and Trade
Political Geography:
Global Focus

5596. American Radical Economists in Mao’s China: From Hopes to Disillusionment

Author:
Isabella M. Weber and Gregor Semieniuk
Publication Date:
10-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
American radical economists in the 1960s perceived China under Maoism as an important experiment in creating a new society, aspects of which they hoped could serve as a model for the developing world. But the knowledge of ‘actually existing Maoism’ was very limited due to the mutual isolation between China and the US. This paper analyses the First Friendship Delegation of American Radical Political Economists (FFDARPE) to the People’s Republic of China in 1972, consisting mainly of Union for Radical Political Economics (URPE) members, which was the first visit of a group of American economists to China since 1949. Based on interviews with trip participants as well as archival and published material, this paper studies what we can learn about the engagement with Maoism by American radical economists from their dialogues with Chinese hosts, from their on-the-ground observations, and their reflection upon return. We show how the visitors’ own ideas conflicted and intersected with their perception of the Maoist practice on gender relations; workers’ management and life in the communes. We also shed light on the diverging conceptions of the role for economic expertise between URPE and late Maoism. As the first in-depth study on the FFDARPE we provide rich empirical insights into an ice-breaking event in the larger process of normalization in the Sino- U.S relations, that ultimately led to the disillusionment of the Left with China.
Topic:
Radicalization, Capitalism, Economic Theory, Transition, and Socialism
Political Geography:
China, Asia, North America, and United States of America

5597. Price Discovery in Commodity Futures and Cash Markets with Heterogenous Agents

Author:
Sophie van Huellen
Publication Date:
11-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The paper develops a price discovery model for commodity futures markets that accounts for two forms of limits to arbitrage caused by transaction costs and noise trader risk. Four market regimes are identified: (1) effective arbitrage, (2) transaction costs but no noise trader risk, (3) no transaction costs but noise trader risk and (4) both transaction costs and noise trader risk. It is shown that commodity prices are driven by both market fundamentals and speculative trader positions under the latter two regimes. Further, speculative effects spill over to the cash market under regime (3) but are confined to the futures market under regime (4). The model is empirically tested using data from six grain and soft commodity markets. While regime (4) is rare and short lived, regime (3) with some noise trader risk and varying elasticity of arbitrage prevails
Topic:
International Trade and Finance, Markets, Investment, Commodities, and Price
Political Geography:
Global Focus

5598. The Mainstream Economics Interpretation of the Local State and Central-Local Relations in Post-Mao China: a Critical Review

Author:
Alexandre De Podesta Gomes
Publication Date:
11-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
Decentralization and the role of local governments have long been touted as key factors in the Chinese economic miracle. This paper intends to critically assess the chief theories advanced by mainstream economics in its attempt to make sense of these aspects of China’s growth story. Firstly the theoretical underpinnings of fiscal federalism, new institutional economics, and market-preserving federalism approaches will be presented, as these theories offer the bedrock for most of the applied insights in which China is framed through the lenses of the central-local relations debate. Secondly, the idea of ‘market-preserving federalism, Chinese-style’ will be critically appraised, highlighting its shortcomings. Thirdly, the paper proceeds by bringing in the mainstream response to these problems, relying on the notion of political incentives and career concerns faced by local cadres. It will be argued that the continual adherence to some core tenets dear to the new institutional economics literature in all previous explanations prevents this broad camp of knowledge to properly grasp the complex dynamics of China’s decentralization drive and the role of local governments in the process. Finally, and in closing, an alternative approach will be offered.
Topic:
Economics, Local, Decentralization, and Federalism
Political Geography:
China and Asia

5599. Endowment Structure, Industry Dynamics and Vertical Production Structure in China-Theory and Evidence

Author:
Jim H. Shen, Leilei Shen, and Jun Zhang
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper proposes a theoretical model and shows that the comparative advantage of China’s factor endowment allows firms specializing in the midstream stage to gain at least as much as firms that specialize in the two ends of the supply chain (capital-intensive stage and labour- intensive stage) in terms of labour productivity and profitability, if and only if they have at least as much viability and use intermediate level of capital intensity. The empirical results are consistent with the theory’s predictions. Our findings on China’s industry supply chain production patterns provide a new angle on the division of gains in the vertical production network driven by the endowment structure. This could have far-reaching implications for the industrial development of other middle-income countries.
Topic:
Industrial Policy, Labor Issues, Capital, and Production
Political Geography:
China and Asia

5600. 10 Things to Watch for on Brexit

Author:
Ken Gude
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
Center for American Progress - CAP
Abstract:
On December 11, British Parliament will vote on Prime Minister Theresa May’s deal to leave the European Union (EU)—commonly known as Brexit. As of now, it seems clear that she is nowhere close to having the votes to pass it.1 The vote comes after a contentious referendum campaign in the United Kingdom and two years of difficult negotiations with the EU, which saw Prime Minister May and Jean-Claude Juncker, the president of the European Commission, formally agree on a Brexit withdrawal agreement on November 25.2 The deal would establish a transition period at least through the end of 2020, during which the United Kingdom would be formally outside the EU but still abiding by its rules and regulations.3 During this transition period, U.K. and EU leadership will negotiate the final terms of the future economic and trading relationship that will see the United Kingdom leave the EU single market and formal customs union yet likely remain in close alignment with the EU on many customs rules.4 If the United Kingdom does remain close to EU customs rules, it would limit the scope of any free trade deals the nation wants with non-EU countries that diverge from EU customs requirements.5 Furthermore, it would allow the United Kingdom to place new limits on the previously free movement of EU nationals into the nation.6 May’s Conservative Party is in the unenviable position of not having enough members of Parliament (MPs) to form an overall majority and, in order to form a government, it relies on an agreement with 10 MPs from the Democratic Unionist Party (DUP) to vote with them on important legislation.7 Yet the DUP opposes the withdrawal deal, as do many of May’s own Tory MPs.8 And then there is Britain’s main opposition, the Labour Party, which is against the deal, as is the third-largest party in Parliament, the Scottish National Party (SNP).9 The reality is that there still is no political consensus in the United Kingdom between the mutually exclusive positions of those who want a hard Brexit and a sharp break from the EU, a soft Brexit that maintains close alignment with the EU, and no Brexit at all.
Topic:
International Cooperation, Social Movement, European Union, Brexit, and Regionalism
Political Geography:
United Kingdom and Europe