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15181. The Nature of Money and the Theory of International Trade: Thornton and Ricardo

Author:
Isabella Weber
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
A rich recent literature reinvestigates the nature of money, but little attention has been paid to the ramifications of the ways in which we theorize money for the theory of international trade. This paper examines the logical relationship between the neutrality of money and self-balancing trade based on Henry Thornton and David Ricardo as two foundational contributions to credit and commodity money theories respectively. I show that both authors theorize trade as self-balancing whenever money is conceptualized as neutral. I distinguish two notions of the neutrality of money: ex ante and ex post neutrality. In Thornton’s Paper Credit money is not neutral ex ante: there can be temporary trade imbalances. But in the long-run money is neutral ex post and international trade boils down to self-balancing barter. In Ricardo money is neutral both ex ante and ex post and international trade is always balanced unless central bank policy undermines monetary neutrality.
Topic:
International Trade and Finance, Economy, Money, and Trade
Political Geography:
Global Focus

15182. The Impact of Environmental Regulations on Manufacturing Outsourcing: Re-examining the Pollution Haven Effect in Global Value Chain

Author:
An Li
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
As countries worldwide attempt to address a series of global and domestic environmental challenges, the pollution haven effect remains an ongoing concern among trade and environment researchers and policymakers. This paper examines the pollution haven effect in the context of global value chains using inter-country input-output data at the manufacturing industry level from 1995-2009. This paper pays special attention to the issue of “doublecounting” caused by intermediate trade. The analysis utilizes two outsourcing measures and two revealed comparative advantage measures appropriate for analyzing global value chains. I propose women’s political power as a novel instrumental variable to address the endogeneity of environmental regulation. Regression results show that more stringent environmental policies are not a significant determinant of manufacturing outsourcing and competitiveness in global value chains. At the same time, women’s political power is associated with more stringent environmental policies.
Topic:
Environment, Women, Economy, Trade, Pollution, and Global Value Chains
Political Geography:
Global Focus

15183. Regulated Market, Trapped Workers: The Impacts of the "Tolerant and Prudent" Policy on Labour Precarity in China’s Online Ridehailing Sector

Author:
Wei Zhang, Hao Qi, and Zhongjin Li
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Since 2017, China has adopted the "tolerant and prudent" policy in regulating emerging digital platform industries. The impacts of this policy on labour precarity have been rarely studied. Drawing on an original survey of over 600 ridehailing drivers in two Chinese cities, Nanjing and Beijing, we conduct a political economy analysis for a three-party framework involving the municipal government, capital, and labour. We find that, in accordance with the "tolerant and prudent" principle, municipal governments stipulated regulations regarding the qualifications of ridehailing vehicles and drivers. These regulations, although they can help reduce labour precarity in the marketplace for licensed drivers, have exacerbated precarity in the workplace. Specifically, in response to the regulations, the ridehailing platforms aligned with thirdparty rental companies that provided licensed vehicles. This arrangement has effectively trapped many ridehailing drivers in the industry: our quantitative analysis shows that drivers bounded by a rental or rent-toown agreement worked significantly longer hours than counterparts who steered their own vehicles.
Topic:
Markets, Labor Issues, Regulation, Digital Economy, and Precarity
Political Geography:
China and Asia

15184. Does Project-Level Foreign Aid Increase Access to Improved Water Sources? Evidence from Household Panel Data in Uganda

Author:
Lynda Pickbourn, Raymond Caraher, and Léonce Ndikumana
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper combines geocoded subnational data on the location of water, sanitation and hygiene (WASH) aid projects in Uganda with nationally representative household-level panel survey data to evaluate the impact of WASH aid on access to water and on the burden of water collection. Specifically, it examines whether proximity to aid-funded WASH projects improves household access to improved water sources and reduces the time burden of water collection. Our results suggest that while aid-funded WASH projects increase household access to improved sources of water, households may also see the time burden of water collection increase, as they may need to travel longer distances and also experience longer wait times due to congestion at water service points. This is an indication that the supply of improved water sources is still insufficient relative to demand as measured by the population density.
Topic:
Foreign Aid, Water, Data, and WASH Projects
Political Geography:
Uganda and Africa

15185. U.S. Monetary Policy and the Decline in the Interest Rates (1990-2007)

Author:
Santiago Capraro, Carlo Panico, and Luis Daniel Torres-Gonzalez
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Interest rates in the U.S. and in other countries have experienced persistent and generalised declines since the 1980s. The main interpretations of this phenomenon ignore the role of monetary factors, such as financial and monetary policy. The essay proposes an alternative interpretation based on the choice of the Federal Reserve (FED) to conduct monetary policy by attributing high priority to financial stability. The interaction between changes in financial regulation, the transformation of "specialized" into "universal” banking, and the concern with financial instability have led the central bank to add to the role of "lender of last resort" that of "lender of first resort," which systematically provides liquidity at a low cost to financial firms. This new conduct of monetary policy has produced the downward trend in interest rates.
Topic:
Monetary Policy, Federal Reserve, Economy, and Interest Rates
Political Geography:
United States of America

15186. The State-Constituted Market Economy: A Conceptual Framework for China’s State–Market Relations

Author:
Isabella Weber and Hao Qi
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
China has created a distinct economic system. Yet despite a growing literature with valuable contributions on the institutional arrangements under ‘capitalism with Chinese characteristics,’ the precise economic mechanisms underpinning China’s state–market relations remain undertheorised. In this paper we develop a conceptual framework of what we call China’s state-constituted market economy. We define essential as ‘systemically significant from the perspective of the state.’ We argue that the Chinese state ‘constitutes’ the market economy by creating, participating and steering markets for essentials in order to stabilise and guide the economy as a whole. We draw on China’s statecraft tradition as well as on proposals for financial policy reform in the U.S. to conceptualise the state market-constitution in China.
Topic:
Markets, Economy, and State-Market Relations
Political Geography:
China and United States of America

15187. Is There a Case for National Development Banks in Africa? Conceptual Rationale and Empirical Evidence

Author:
Léonce Ndikumana, Karmen Naidoo, and Francisco Perez
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
National development banks remain an important part of modern financial systems in developed as well as developing countries. The attention to the role of national development banks was reinvigorated in the aftermath of the 2008 global financial crisis, and their potential role in promoting access to finance and providing counter-cyclical financing is better appreciated today than in the structural adjustment era of the 1980s and 1990s. In this context, this study examines the landscape of national development banks in Africa and provides empirical evidence of their role in complementing commercial banks to meet the financing needs of the real sector using bank-level data from selected countries and the BankFocus database. The empirical results show that while national development banks do not lend more relative to commercial banks, they tend to focus more on medium-term and long-term lending as prescribed by their mandate. Interestingly, medium-term and long-term lending is associated with lower non-performing loan ratios as well as higher returns on assets. The results are similar for public banks. The evidence suggests that empowering national development banks with enhanced lending capacity and operational autonomy would significantly help alleviate the shortage of medium-term and long-term credit in African economies. The paper includes suggested avenues for further research.
Topic:
Economy, Banks, and Financial Systems
Political Geography:
Africa

15188. Notes on Covid-19, Potential GDP, and Hysteresis

Author:
Thomas Michi
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This note provides a model framework for thinking about stabilization policies in the presence of hysteresis after a negative shock like the Covid-19 pandemic. Headline measures of so-called potential GDP published by the Congressional Budget Office represent only one of many possible inflation-neutral trajectories for output. The term potential GDP is misleading since potential implies a unique limit on output. It is much more accurate to consider a range of possible trajectories or multiple equilibria. Repairing the damages from a shock will require overshooting the inflation target and running the economy above its inflation-neutral equilibrium in order to restore the status quo ante level of output and employment. The model assumes constant trend growth so that path dependence takes the form of pure output-level effects.
Topic:
Political Economy, GDP, COVID-19, and Financial Stability
Political Geography:
Global Focus

15189. The Public Banking Movement in the United States: Networks, Agenda, Initiatives, and Challenges

Author:
Esra Ugurlu and Gerald Epstein
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this paper, we analyze the contemporary public banking initiatives in the United States. We first provide a brief historical account of public-oriented banking in the United States. We then map out the central nodes in the contemporary public banking advocacy networks. Based on an online questionnaire and semi-structured interviews we held with public banking organizers and experts across the country, we provide an overview of the achievements of this growing movement, describe the central socio-economic issues they organize around, and examine the challenges they face. We demonstrate that the interest in public banking is a reaction to a number of socio-economic and ecological issues the United States faces, including the infrastructure crisis, ecological crisis, financial exclusion, and problems stemming from the management of state and local government resources. We argue that public banking can be an important tool in addressing these problems and suggest how the federal government, through the Treasury and the Federal Reserve, can support these initiatives.
Topic:
Political Economy, Banks, Advocacy, and Public Banking
Political Geography:
North America and United States of America

15190. Did Alcohol Policy Really Cause the Postsocialist Mortality Crisis? Revisiting the Rebound and Affordability Hypotheses

Author:
Aytalina Azarova, Gabor Scheiring, Michael Ash, and Lawrence King
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper reexamines the argument that alcohol policies were the major factor behind the mortality crisis in postsocialist Russia. We show that the correlation between the Gorbachev anti-alcohol campaign (rebound hypothesis), alcohol prices in the 1990s (affordability hypothesis), and mortality reported in previous analyses is not robust to splitting oblasts into Far- East and the rest of Russia. Our analysis conducted on a sample of 534 towns in the European part of Russia also finds no robust evidence supporting the two hypotheses. In contrast, findings linking privatization to mortality are robust to controlling for the anti-alcohol campaign and the affordability of alcohol.
Topic:
Health, Political Economy, Mortality, Alcohol, and Affordability
Political Geography:
Russia and Soviet Union