Demand Regimes Research Articles

Estimating preseason irrigation losses by characterizing evaporation of effective precipitation under bare soil conditions using large weighing lysimeters

Irrigation from the Ogallala aquifer is used to supplement insufficient precipitation for agricultural crop production in the semi-arid Texas High Plains. Decreased pumping capacity has compelled many producers to “pre-water” fields to field capacity prior to planting to hedge against pumping limitations later in the season. However, the direct measurement of evaporative losses from preseason irrigation of bare soil is not commonly studied. The quantification of evaporative losses from effective precipitation, or the net amount of water that infiltrates into the soil following a precipitation event, can be used as a surrogate for estimating losses from preseason irrigation. We identified 35 precipitation events that occurred over lysimeter fields under fallow conditions in 2002, 2005, and 2009. Events were categorized into four bins of precipitation magnitude ranging from 3mm to 35mm. Subsequent evaporation was measured for a period of up to seven days following rainfall events using large weighing lysimeters at the USDA-ARS Conservation and Production Research Laboratory in Bushland, TX. An exponential decay function was used to characterize bare soil evaporation using maximum cumulative measured evaporation (ECmax), soil water transfer constant (k), and cumulative grass reference evapotranspiration (ETCos). The wide range of ECmax values and k values demonstrated the sensitivity of evaporative losses to both antecedent soil water content and evaporative demand. We also present measured average daily evaporation values for a range of evaporative demand regimes for each precipitation bin. From data analyzed in this study, nearly all of the water from precipitation events of 10mm and less were lost to evaporation within the following day under moderate to high grass reference evapotranspiration (ETos) conditions. Nearly all water from precipitation events between 20 and 30mm was lost to evaporation between three to four days following the event under similar evaporative demand. The considerable potential evaporative losses from preseason irrigation call into the question the prudence of the preseason irrigation, particularly for regions with limited groundwater resources.

Neoliberal growth models, monetary union and the Euro crisis. A post-Keynesian perspective

ABSTRACTThe paper offers an account of the Euro crisis based on post-Keynesian monetary theory and its typology of demand regimes. Neoliberalism has transformed social and financial relations in Europe but it has not given rise to a sustained profit-led growth process. Instead, growth has relied either on financial bubbles and rising household debt (‘debt-driven growth’) or on net exports (‘export-driven growth’). In Europe the financial crisis has been amplified by an economic policy architecture (the Stability and Growth Pact) that aimed at restricting the role of fiscal policy and monetary policy. This neoliberal economic policy regime in conjunction with the separation of monetary and fiscal spheres has turned the financial crisis of 2007 into a sovereign debt crisis in southern Europe.

Debt-driven growth? Wealth, distribution and demand in OECD countries

The paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components. We extend the Bhaduri and Marglin (1990) model to include personal income inequality as well as asset prices and debt. This allows for an evaluation of the wage or profit-led nature of demand regimes, of the expenditure cascade argument (Frank et al. 2010) and several hypotheses regarding the effects of wealth and debt. Our estimates are based on a panel of 18 OECD countries covering the period 1980-2013. For the full panel the average demand regime is found to be wage led. We fail to find effects of personal inequality, but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis.

Inflation, growth, and distribution: The Brazilian economy after the post war

Following Marglin and Bhaduri (1990), the purpose of this paper is to investigate empirically the interaction between income distribution and growth of aggregate demand during the 1951–89 period in Brazil. Applying Hein and Vogel’s (2008) methodology we conclude that the Brazilian economy showed a profit-led demand regime. In a context of high inflation, high concentration of markets, and wage control, retained profits were the main source to finance new capital. In this sense, we found a large sensitivity of investment relative to the wage share, a result that is compatible with a consumption pattern based on high income, which supported the growth trend with low wages observed during the period.

Functional Income Distribution and Aggregate Demand in Greece

This paper examines empirically the effect of functional income distribution on aggregate demand in Greece for the period 1960-2010. The analysis is based on a Bhaduri/Marglin-variant of a simple post-Keynesian model developed by Stockhammer et al. (2009). Theoretically, it is expected that a rising wage share will increase consumption, but reduce investment and net exports. The model is estimated by means of separate single equations for consumption, investment and net exports. Three different econometric techniques were applied in order to ascertain robust results. The anticipated theoretical effects of income distribution on the demand components are statistically confirmed. The analysis concludes Greece is another European economy with a wage-led demand regime. This finding justifies the disappointing results of Greece’s economic performance over the past decades, but most importantly provides an explanation for the deeper than anticipated recession and its inability to recover.

Structural change, aggregate demand and employment dynamics in the OECD, 1970 - 2010

Abstract The paper combines Baumol's model of structural change with a model of aggregate demand growth in the Keynesian–Kaleckian tradition to predict the dynamics of aggregate employment. The model for the demand regime is estimated with – and Baumol's model for the productivity regime is calibrated on – OECD data. The trajectory for employment predicted by the combination of the two models tracks the actual employment dynamics in the OECD over the period 1970–2010 remarkably well.

Structural change, aggregate demand and employment dynamics in the OECD, 1970–2010

The paper combines Baumol's model of structural change with a model of aggregate demand growth in the Keynesian–Kaleckian tradition to predict the dynamics of aggregate employment. The model for the demand regime is estimated with – and Baumol's model for the productivity regime is calibrated on – OECD data. The trajectory for employment predicted by the combination of the two models tracks the actual employment dynamics in the OECD over the period 1970–2010 remarkably well.

Personal income inequality and aggregate demand

This paper presents a theoretical and empirical investigation of how changes in the size distribution of income can affect aggregate demand and the demand regime of an economy. After presenting empirical evidence for the US economy that the propensity to save increases significantly from the bottom to the top quintile of wage earners, we demonstrate that more equal distributions always lead to higher output in the traditional neo-Kaleckian macroeconomic model. We also present conditions under which a reduction of income inequality among workers results in demand becoming more wage led. This view is supported by the results of an econometric study for the USA (1967–2010), which show that the rise after 1980 in income inequality has made the US economy more profit led.

A neo-Kaldorian approach to structural economic dynamics

Although the structural economic dynamic approach provides a simultaneous consideration of demand and supply sides of economic growth, it does not fully take into account the possible role played by demand in the generation of technical progress. From a neo-Kaldorian perspective, this paper seeks to establish the concepts of demand and productivity regimes in an open version of the pure labour Pasinettian model. In order to derive the demand regime, a disaggregated version of the static Harrod foreign multiplier is derived, while the productivity regime is built in terms of disaggregated Kaldor–Verdoorn laws. The upshot is a multi-sectoral growth model of structural change and cumulative causation, in which an open version of the Pasinettian model to foreign trade may be obtained as a particular case. Furthermore, we show that the evolution of demand patterns, while being affected by differential rates of productivity growth in different sectors of the economy, also play an important role in establishing the pace of technical progress.

Income Distribution and Economic Growth: Post-Keynesian Models and Policy Analysis

One of the main consequences of global economic crisis of 2008 and the Euro-zone crisis of 2009 is that some dominating paradigms of neoclassical economics such as pure market economics and supply side economic growth have been questioned. This paper reviews the theoretical contributions of Post Keynesian literature to the issue of distribution-growth nexus. Furthermore, this article discusses economic policy proposals and analyses developed by Post Keynesian models based on neo-Kaleckian theoretical foundations. In contrast to neo-classical theory, neo-Kaleckian models have very strong political economy implications and distributional policy (egalitarian or unequal) has a profound impact on economic growth. Neo-Kaleckian models suggest that rising income inequalities produced by neo-liberal policies may generate insufficient level of aggregate demand, leading to slow economic growth in a wage-led demand and growth regime.

Unemployment, capital accumulation and labour market institutions in the Great Recession

This paper restates the post-Keynesian view of unemployment within a NAIRU framework. In the short run, the private effective labour demand need not be downward sloping because of debt deflation and wage-led demand regimes. In the medium run, the NAIRU will be endogenous because of the social norm character of wage setting and the supply-side effects of capital accumulation. Capital investment rather than labour market institutions is the crucial variable that explains changes in unemployment performance. We provide econometric evidence that the post-Keynesian view holds up well in the recession following the crisis of 2008.

Conspicuous Consumption, Inequality and Debt: The Nature of Consumption‐driven Profit‐led Regimes

AbstractThis paper extends the theoretical concept of wage‐led and profit‐led demand regimes by incorporating relative consumption concerns. Specifically, it integrates the Veblenian concept of conspicuous consumption into the Bhaduri–Marglin model by assuming that relative consumption concerns matter primarily within the working class. If in such a framework the profit share increases and the corresponding decrease in workers' income is distributed unevenly, efforts to ‘keep up with the Joneses’ may increase consumption and, hence, lead to a consumption‐driven profit‐led regime.

Innovation and Market Structure in Pharmaceuticals: An Econometric Analysis on Simulated Data

Summary The contribution of this paper is twofold. First, it presents the results of a “history-friendly” simulation model of evolution of the pharmaceutical industry. Second, it aims at contributing to a more general methodological discussion about agent-based models by proposing an econometric analysis of the results of the simulations. The case of the pharmaceutical industry has been studied extensively by scholars because, despite the high level of R&D intensity, the industry has been characterized by a relatively low levels of concentration. The model is able to reproduce the main stylized facts of the industry in an evolutionary perspective. In this paper we extend the analysis conducted in two previous works (Garavaglia et al. 2012, 2013) by further qualifying the findings with an extensive econometric investigation of the model outputs. The paper focuses the attention on the determinants of market structure, the innovative performance of the industry, the diversification in multiple submarkets and the level of prices. We find that the properties of the technological and demand regimes are key determinants of the patterns of industry evolution and that the main mechanisms driving the model are the random processes of search, the discovery of new submarkets as well as the interactions between patent protection, imitation and price competition. In addition, this paper emphasizes how the emerging leaders in the industry are those innovative early entrants which entered in large submarkets, showing the importance of the first mover advantage and of the size of the “prize” accruing to innovators when they discover a new rich submarket.

Dynamic Cournot Models for Production of Exhaustible Commodities Under Stochastic Demand

We extend the dynamic Cournot model of Ludkovski and Sircar (2011) by considering stochastic demand. We analyze a duopoly between an exhaustible producer and a “green” competitor. Both producers dynamically make decisions regarding their production rates; in addition the exhaustible producer optimizes search for new reserves. The aggregate price earned by the producers switches between high and low demand regimes with exogenously given holding rates. We study how the regime changes and the relative cost of production, which is a proxy for market competitiveness, affect game equilibria, and compare with the case of deterministic demand. A novel feature driven by stochasticity of demand is that production may shut down during low demand to conserve reserves.

Joint Decision of Pricing and Advertising Investment for Online Group-Buying Under Intersecting Demand Regimes

Joint Decision of Pricing and Advertising Investment for Online Group-Buying Under Intersecting Demand Regimes

A Simple Water Balance Model of Rubber Tree Plantations under Different Evaporative Demand Regimes

Drought constraints and transpiration of rubber (Hevea brasiliensis) plantations under different evaporative demand regimes were assessed by the simple water balance model. A lump water model, BILJOU (BILan hydrique JOUrnalier), is the daily water balance model. This model requires daily potential evapotranspiration (ETo) and rainfall as input climatic data, also requires site and stand parameters are maximum extractable soil water and leaf area index (LAI). The study was carried out two sites; namely Songkhla and Chachoengsao province, Thailand, traditional and new plantation area, respectively. The calibration of this model was done with sap flow measurements. Soil water derived by tensiometer for Songkhla and soil sampling for Chachoengsao were used to validate the model. Under non limiting soil water and full canopy, transpiration of rubber was influenced by evaporative demand. Consistently, under limited soil water represented as threshold of relative extractable water (REWc < 0.4), transpiration was influenced by REW. In the new plantation area; Chachoengsao, drought constraints were evident annually from the beginning of senescence until the new accomplished flushing; December to June. However, at Songkhla site, transpiration and soil water was mainly driven by evaporative demand. And the limitation of soil water represented shortly during the plateau stage of LAI.

Book review: Alternatives to Neoliberal Globalisation: Studies in the Political Economy of Institutions and Late Development, by Dic Lo

Alternatives to Neoliberal Globalisation: Studies in the Political Economy of Institutions and Late Development, Palgrave: London, 2012; 197 pp: 9780230347182, 60 [pounds sterling] (hbk) Globalisation and development are vital issues that affect lives of millions of people, and they have always been among the primary problems that have demonstrated the bankruptcy of mainstream perspectives in the social sciences, and the power of critical and radical political economy. Alternatives to Neoliberal Globalisation, by Dic Lo, is a welcome contribution to this field. In the first half of the book, Lo provides a solid critique of a number of mainstream economic perspectives on global development ('new institutional economics', 'new political economy', etc.) as well as an assessment of some heterodox approaches ('new international division of labour', the variety of dependency theory, regulation theory, etc.). Lo's intention is to reconcile technological and institutional dimensions of development. Building on the regulation approach to dynamics of capitalist development and the Schumpeterian approach that considers the technological underpinning of long-term change, he develops a techno-economic paradigm. It is the main notion of this book, and is defined as a combination of 'a generic technology that affects a major part of the economy' with 'the particular form of industrial (intra- and interfirm) organisation plus the demand regime that matches the comparative efficiency attributes of particular organisational form' (p. 67). Developing the taxonomy of what he describes as three main theoretical paradigms of explanation of the market system (Walrasian, neo-Hobbesian and Marxian), as well as Marxian and Smithian notions of the division of labour, he provides a description of three stylised techno-economic paradigms. These are Paradigm I (based on the social division of labour, markets and steady-state growth path), Paradigm II (based on the detailed division of labour, hierarchies and transitory multiple growth path), and Paradigm III (based on the social division of labour, networks and non-converging multiple growth paths). These distinctions and the very notion of techno-economic paradigms sound quite abstract, but fortunately, the second half of the book provides some clarifications for these notions and taxonomies. This consists of applications of the theory developed, and a discussion of conceptual perspectives on selected important developments in the global economy. The chapter on East Asia provides a balanced synthesis of theoretical explanations for the rise and decline of the 'East Asian miracle' with Lo's own discussion of a region-wide regime of accumulation and its mediated relation to the dynamics of the world market. The chapter on post-Soviet transition is again centred on economic theories, and is based on the apparent contradiction of 'Big Bang' and 'gradualist' theoretical and policy approaches to economic reforms. Lo shows that both of these approaches 'place emphasis on market formation, the creation of private ownership, and the total integration of transition economies in the world market', and thus have 'serious conceptual flaws in explaining the nexus of transition and development' (p. 141). While this is certainly true, the absence of any real-world assessments of post-Soviet capitalist transition make this chapter absolutely outdated, since it remains stuck in the conceptual debates of the early 1990s. Two chapters in particular have a special relevance, perhaps, for readers of Capital & Class, because of their topics. In Chapter 6, Lo discusses the economic performance of Chinese development in the post-Maoist era and its contradictions with neoliberal prescriptions. The most interesting aspect of this chapter is its confrontation with the standard left-wing critiques of economic and developmental policies of the Peoples' Republic of China, which relate growth performance to the super-exploitation of Chinese labour and export dependence on the world market (for example, see Harvey 2005; Li 2009). …

Was Ireland's Celtic Tiger Period Profit-led or Wage-led?

This paper examines the macroeconomic performance of the Irish economy in the years leading up to the Celtic Tiger period and afterward, from 1980 to 2011. The goal of the paper is to determine how a severe recession in the 1980s could be followed so quickly by the unprecedented boom years of the Celtic Tiger, and followed again by the marked economic downturn since 2007. I build a Keynesian model of growth that integrates effective demand and productivity regimes to allow for the possibility that a redistribution of income can either spur or retard growth, depending on whether the regime is wage-led or profit-led. Using data for the Irish economy I test this model for wage-led or profit-led growth, finding plausible evidence that the Celtic Tiger years were, in fact, profit led.

Increasing Returns, Technological Progress and Cumulative Causation: The Case of Chile (1986-2008)

The ultimate proposal of the present research is to assess productivity regime which is dened as the route from demand growth to productivity growth of the Chilean economy since 1986 to 2008. In doing so, increasing returns are assessed by industrial sector and the technological progress pattern of the Chilean economy is analyzed. Two outcomes are presented. First, from productivity regime results, the Chilean economy presents dynamic increasing returns by 0.78 and the elasticity of employment to output has decrease being today 0.22. The latter imply that the main reason of the slowdown trend of the productivity growth and output growth in the Chilean economy since the Asia crisis was not a downward shift in the productivity regime, but a leftward shift in the demand regime. Second, despite the slowdown of utilization rate of the copper mining industry in the period 2003-2008, the TP pattern of the Chilean economy is led by investment and led by the trade sector being the prevailing Marx Biased Technical Change. The latter imply that there is a possibility that precisely the increasing trend in capital coecient against a decreas

International Competition and Distributive Class Conflict in an Open Economy Kaleckian Model

AbstractThis paper constructs an open economy Kaleckian model in which international competition affects the bargaining process between firms and workers, and investigates the effects of such bargaining on the macroeconomy. We show that the effects of a change in the bargaining power on aggregate demand depends not only on the demand regimes but also on which agents bears more of the burden arising from the international price competition. Moreover, if the real exchange rate has a small impact on the trade balance, the economy is stable, whereas if it has a larger impact on the trade balance, the economy is unstable.