Neoclassical Theory Research Articles

Saudi Arabia’s costly war in Yemen: a neoclassical realist theory of overbalancing

Saudi Arabia faced multiple threats from Yemen in 2015: its southern neighbor had collapsed; a hostile sub-state actor, the Houthis, was entrenching itself along the border; and the presence of its rival Iran was growing. Responding was rational; it would have been sub-optimal for Riyadh to underbalance by doing little to counter the threat. Instead, however, Saudi Arabia overbalanced by launching a major air campaign and imposing a maritime and air blockade; as a result, it became bogged down in a costly war it cannot win. Why was this the case, and with what consequences? To answer this question, this article develops and applies a neoclassical realist theory of overbalancing. The first objective is nomothetic: to develop a theory of overbalancing, an important phenomenon neglected by the balancing literature. The second is empirical: to shed light on the Saudi decision to launch the war in Yemen.

South African Land Reforms Under the Auspices of the “Radical Economic Transformation”

Abstract The land question is an emotive issue across the world. At independence, erstwhile colonies adopted land reforms to address colonial imbalances in landholding. South Africa is one such country that has embarked on land reforms with the view to correcting economic imbalances created by the apartheid past. However, land reform in South Africa has not only been slow but has failed to deal with the twin challenges of poverty and inequality. Using qualitative research design and neoclassical theory, this paper investigates South Africa’s land reforms under the auspices of radical economic transformation. The paper argues that the wholesale expropriation of land without compensation does not fit into the obtaining (neoliberal) economic blueprint that has dominated the country over the years. The call for a radical transformation of landholding rights in the country without structural changes in macroeconomic management remains political rhetoric.

Short selling and firm investment efficiency

This paper investigates the informativeness of short sales on detecting firm investment inefficiency. Neoclassical and agency theory suggest that investment inefficiency destroys firm value by allocating resources to less-valued uses. This paper finds that short-sellers adjust their short positions before the announcement of a financial statement, to use their information advantage on firm investment inefficiency. The relation between the short positions in a firm and its future investment inefficiency is both statistically and economically significant, and robust to a broad set of control variables. Subsample analyses show that the informativeness of short sales positions about future investment inefficiency is concentrated on overinvestment firms, firms with little board independence, and firms with low CEO incentive pay.

After Neoliberalism: Economic Theory and Policy in the Polycrisis1

AbstractMainstream economic theory and policy have struggled to address (and in some cases have made worse) the multiple economic crises since 2008—global financial crash, austerity, stalled productivity, wage stagnation, rising inequality, inflation, climate and environmental breakdown. At the root of this failure is the ‘ontological individualism’ which underpins neoclassical economic theory: the belief that individual households and firms are sovereign actors. It proposes in its place a premise of ‘ontological institutionism’—the view that economic behaviour is primarily influenced by the institutional structures and rules within which it occurs. Commonplace in other social sciences, this view radically changes economic analysis and policy prescription. Based on an explicit ethical definition of policy objectives, the article offers an ‘institutionally pluralist’ view proposing different kinds of institutions for five different spheres of economic life. Arguing that economic policy should be seen as a process of institutional design (not simply making markets more efficient), it offers some illustrative policy proposals in key fields, from climate change to business investment.

Do ICT Development and labor force foster Economic Growth in Indonesia?

Purpose: This paper aims to determine the ICT Development Index and other supporting variables affecting Indonesia's economic growth.Methods: This study uses secondary data from 1996-2019. Using economic growth variables as endogenous variables, and labor force, gross fixed capital formation (GFCF), cellular phones per 100 people, fixed telephones per 100 people, and internet users as exogenous variables. The data analysis technique used OLS multiple linear regression with eviews 9 application.Finding: The neoclassical theory developed by Solow (1957) a name "Growth Accounting" that economic growth formed from the factors of production and technology. This finding only the variable Mobile cellular per 100 people does not affect economic growth in Indonesia, and other variables are significant.Novelty: This study uses an innovation variable, namely the ICT Development Index, to complement the variables of production factors (labor and GFCF). This study focuses on Indonesia because it is about Indonesia's potential use of technology and information, among indications of the use of telephone and internet users in Indonesia.Implications: Further research can apply other ICT Development variables such as ICT exports or use the other countries.Keyword: GDP, Gross Fix Capital Formation, Internet User, Labor Force.

Drivers of household saving in East Central European countries. A push and pull model perspective

ABSTRACT There is no consensus in the economics theory about the determinants of household saving. The article composes vector error correction (VEC) models to identify the determinants of household saving in the East Central European countries from 2005–2020. Its novelty is that it identifies push and pull factors in accordance with the Keynesian and neoclassical theories whose mixed approach has not been included in the methodology of relevant papers in relation with East Central European countries. The examined countries are indicated to be homogenous from macroeconomic perspective. Results confirm that household saving increases because of decreases in consumer confidence, unemployment, and inflation rates. Increases in the deposit rate and real house price index are related to these pull factors, while decreases in the official share index correlates withincreases in household saving. Results can serve as guidelines for policy makers about incentives which stimulate household saving most effectively in the region.

Influence of optimal room occupancy strategies on revenue maximisation during slack periods in selected 3- to 5-star hotels in Ghana

ABSTRACT: An organisation’s inability to generate adequate income to sustain its business activities poses a significant challenge to maintaining profitability. Employing revenue-maximisation strategies is crucial to securing necessary resources and ensuring the continued success and stability of organisations. The purpose of this study was to examine the strategies adopted to achieve optimum room occupancy during slack periods to maximise revenue in 3-5 star-rated hotels in selected regions of Ghana. The study adopted a descriptive survey and incorporated mixed methods for data collection. The study was guided by neoclassical economic theory. The Yamane formula was used to determine a sample size of 60 hotels rated 3- to 5-star from the study sites. A stratified simple random sampling was employed to select 60 hotels that were used as study sites. In each hotel, eight respondents — general managers and departmental supervisors — were targeted, giving a total of 480 respondents. A purposive sampling method was used to select eight key informants from each category, drawn from the Ghana Tourism Authority and the Association of Hoteliers. Questionnaires were used to collect quantitative primary data from general managers and department heads. Key informant interview schedules were used to collect qualitative data from key informants. A multiple linear regression model was used to predict the overall relationship between independent and dependent variables. The analysed data was presented in tables and charts. The results revealed a significant correlation (R −0.823 = 82.3%) between the strategies employed to achieve optimal room occupancy. Based on the findings, it is recommended that 3- to 5-star-rated hotels in Ghana continue to focus on offering special rates and targeted marketing campaigns to attract guests, as well as collaborating with other stakeholders to expand their reach.

Integrating Complex Derivative Models in Understanding Dollarization’s Impact on Sustainable Development Goals and Environmental Economics: A Neo-Classical Finance Perspective

Dollarization has major implications for sustainable development and environmental economics in developing countries. This paper integrates complex derivative models from neoclassical finance theory, including stochastic volatility, copula, and regime-switching models, to quantitatively analyze the impacts of dollarization. The models examine effects on poverty, inequality, economic growth, natural capital investment, and green bond financing access related to sustainable development goals and environmental economics. Despite limitations in assumptions, the models provide useful risk quantification. Results suggest dollarization exacerbates volatility and negative externalities, hindering sustainability objectives. The integration of derivative modeling and development economics provides an analytical framework for examining dollarization, indicating potential gains from gradual de-dollarization policies. Further empirical research is warranted to validate the theoretical insights.

Classical and neoclassical economic theory: Fundamentals of regulation for the agricultural sector

The work is devoted to the complex issues of the influence of the theoretical assumptions of classical and neoclassical economic theory on the sustainable development of the agricultural sector. The purpose of the work is to substantiate the scientific theoretical foundations of classical and neoclassical economic theory as the basis for regulating the agricultural sector. The methodological basis of the study is an integrated approach, in which the approaches of classical and neoclassical economic theory to the regulation of the agricultural sector are considered. The scientific foundations of classical economic theory are studied from the point of view of three concepts: “economic man”, “natural order”, and equilibrium economics. It is shown that from the point of view of the economic theory classics, the market appears to be a self-regulating mechanism that leads to maximum efficiency in production and allocation of goods, the concept: the state is a “night watchman”. The scientific foundations of neoclassical economic theory are investigated from two major methodological bases: the marginalism principle and descriptive models of economic behavior of people. The automatic mechanism of the best use of market resources is shown and, according to neoclassical theories, the competitive market, without government intervention, is able to lead to the best equilibrium results. Recommendations are given for improving market relations to ensure the economic growth of the agricultural sector in terms of intracompany and intersectoral competition.

How can Developing Countries in Asia Achieve Economic Growth? Taking Bangladesh as an example

This study analyzes the key drivers of economic growth in Bangladesh from 1980 to 2018 based on theoretical frameworks and historical data. It takes Bangladesh’s development experience as the research object and aims to make three contributions. Firstly, it examines the main contributing factors to Bangladesh’s past growth within the analytical framework of the neoclassical growth theory. This allows summarizing the underlying causes of Bangladesh’s historical economic growth trajectory. Secondly, it investigates the current contributing factors and obstacles to growth in Bangladesh to understand how countries like Bangladesh, Myanmar and Vietnam can achieve ongoing economic growth. Lastly, the research methodology employs empirical analysis of time series data on factors such as investment, labor force, technology and GDP within the framework of neoclassical growth theory. The findings suggest that capital accumulation, driven by investment, has made the largest contribution to Bangladesh’s strong economic performance in recent decades. However, risks remain if over-reliance on the garment industry and uneven regional development are not addressed through continued policy reforms focusing on diversification, balanced development and social inclusion. The study provides preliminary guidance for Bangladesh and similar nations to sustain their growth momentum.

Генезис концепцій людського капіталу в економічній теорії

The aim of the article is to study the evolution of scientists’ views on the category of human capital and to reproduce the genesis of this scientific category. Human capital is considered in the article as a multifactorial intellectual system that explores the emergence, development, formation and improvement under the influence of objective and subjective factors. The article analyzes the history of the development of economic thought and the evolution of the theory of human capital. A study of the system of scientific tools of representatives of mercantilism, the school of physiocrats, classical political economy, marginalism, neoliberalism, neoclassical theory, Keynesianism, institutional school and neo-institutionalism is carried out and the possibilities of its application in the global context of human development are determined. The objective economic, organizational, historical, scientific-technical, social and institutional prerequisites for the formation of the conception of human capital are defined. The conception of human capital is a new socioeconomic paradigm, the basis for the formation of which was the transition from the traditional economic system of development to the modern or innovative system. Within the framework of the theory of human capital, a person is considered through the prism of economic processes: social production, reproduction, economic activity. This was the basis for the rapid formation and spread of the theory of human capital. Objective reality emphasizes the importance of the formation and effective use of human capital, and significant scientific achievements on this issue confirm the long process of evolutionary development and relevance regardless of time intervals. The directions for further research include the development of methods for assessing human capital, in particular on the basis of the Human Development Index, a powerful tool for analyzing global processes and transformations in society.

Economic convergence of the Balkan countries towards the European Union

This paper aims to analyze the economic performance of Balkan countries in comparison to the European Union (EU) average, with the objective of assessing the convergence of Balkan nations toward the EU during the period 2000–2019. The economic variables under consideration encompass per capita income, the corruption perception index (CPI), salary levels, and direct foreign investments. Employing β-convergence, rooted in neoclassical growth theories, this study aims to test the hypothesis that economically disadvantaged countries experience more rapid growth in per capita income than their wealthier counterparts. The empirical findings of this investigation reveal a discernible long-term convergence among the Balkan countries themselves, as well as towards the EU member states. The rate of convergence exhibits variations contingent upon the developmental status of the respective countries, along with nuances related to their economic structure and corruption levels. Despite these observed convergences, a substantial gap persists, and the pace of economic integration of Balkan nations into the EU appears to be a gradual process. This study underscores the complex relationship between economic convergence, country-specific characteristics, and the broader context of regional integration.

Человеческий капитал региона: ретроспективный анализ концептуальных положений теории

The article substantiates the relevance of the concept of human capital in economic science, taking into account the transformation of economic processes in the planning and implementation of regional policy of sustainable and balanced development of socio-economic systems (within the framework of some strategic and program-target doctrinal documents). The paper retrospectively analyzes the evolution of the formation and development of key concepts (three stages are conditionally distinguished: from inception to modernity), which determined the «hard core» of the theory of human capital within the framework of classical and neoclassical economic theory. Based on the analysis of fundamental and modern research works, the main postulates of the role of human capital in the development of regions were identified and structured. In general, human capital is one of the key factors determining the success of economic development of the region. It represents the accumulated knowledge, skills and abilities possessed by people living in a particular region. This resource is strategically important and affects various spheres of the economy, including production, innovation and competitiveness.

INCENTIVISE HOUSEHOLDS TO ADOPT PROPER WASTE MANAGEMENT AND WATER CONSERVATION METHODS VIA BLOCKCHAIN TECHNOLOGY

Nobel Laureates, Richard Thaler and Cass R. Sunstein, in their Nobel Prize winning work, Nudge: Improving Decisions about Health, Wealth, and Happiness, introduced the idea that ‘governments can help people make better decisions while respecting their freedom of choice.’ This upended the neo-classical economic theory that believed that “people make rational economic decisions on the basis of complete Information.” 1 Drawing inspiration from the work of Nobel Laureate Richard Thaller, our plan is to nudge and incentivise households to adopt proper waste management and water conservation methods communities across India to choose sustainable sources of energy and be conscious of their resource consumption.

Entrepreneurial Management Structure and Performance of Small and Medium Livestock Enterprises in Kenya

The purpose of this study was to investigate the relationship between entrepreneurial management structure and the performance of small and medium livestock farms in Kenya, with a focus on examining the moderating effect of the regulatory framework on this relationship. The study was grounded in key theoretical frameworks, including Joseph Schumpeter’s theory of innovation, Knight’s Uncertainty Bearing theory, McClelland’s theory of motivation, the Resource-Based View theory, and the Neo-Classical Theory of Management (Elton Mayo). These theories provided a comprehensive understanding of the factors influencing entrepreneurial success in the livestock sector. A mixed research design was adopted, targeting a population of 500 livestock enterprises in Turkana County. Stratified sampling was employed to ensure representation across different enterprise sizes, resulting in a sample of 196 entrepreneurs. Data was collected using meticulously designed questionnaires, and the validity and reliability of these instruments were confirmed through pilot testing. The analysis revealed that entrepreneurial management structures, when effectively aligned with supportive regulatory frameworks, significantly enhance the performance of small and medium livestock enterprises in Kenya. To further strengthen the livestock sector, the study recommends that SMEs adopt comprehensive strategies, including product diversification, differentiation, cost reduction, and internationalization. Additionally, technological and innovation incubators should play a crucial role in ensuring that new technologies are relevant, compatible, and beneficial to the livestock sector. Government intervention is vital, with the need for incentives to enhance competitiveness, alongside strategies to retain market share in a challenging environment. The study also emphasizes the importance of implementing performance-based reward schemes and continuous managerial training to boost decision-making and enterprise success. Moreover, robust anti-corruption policies and streamlined tax systems are essential to reducing bureaucracy in the livestock value chain. These findings are expected to benefit a wide range of stakeholders, including entrepreneurs, policymakers, implementers, and the broader public, contributing to sustainable growth in the livestock sector.

THE THEORY OF WELFARE ECONOMICS AND TAX REGULATIONS: AN EMPIRICAL EXAMPLE OF PIGOUVIAN TAXES

The aim of this paper is to present the impact of the economic theories and empirical studies on the contemporary tax laws and regulations in numerous jurisdictions, based on a case study of the economic concept of Pigouvian taxes which stems from the neoclassical theory of welfare economics. The author presents the theoretical concept of the Pigouvian taxation and its econometric verification and tries to demonstrate that the empirical examples of the implementation of such fiscal instruments have proved to be effective based on the quantitative assessment. However, serious deficiencies in the methodology of empirical studies on this phenomenon can also be identified, which affects the possibility of assessing the potential practical implications of introducing such mechanisms. Nevertheless, as the author demonstrates by referring to the World Bank data, the discussed concept significantly influences contemporary tax law in many countries and is a source of inspiration for many tax jurisdictions. The analysis carried out in this paper indicates that not every implementation and post-hoc evaluation of economic theory implemented into tax systems can be effectively studied with the use of economic analysis of law; when analysing regulations introduced to influence the behaviour of individuals, it is also necessary to take into account the research in other disciplines, for example psychology and sociology, even if the inspiration for the regulations in question was well-grounded and developed in economic theories. For this reason, it can be argued that economic analysis of law, also referred to as law and economics, although a valuable cognitive approach, should never be the only basis of analysis, even if a regulation in question has a strictly economic origin.

Examining the Influence of International Migration and Migrant Remittances in Nigeria

Migration is a common phenomenon, often driven by solid motivations, mainly involving long-term relocation. Residents of less affluent countries frequently migrate to more prosperous nations for improved livelihoods. Remittances, the transfer of monetary and societal supplies from the nations that host immigrants to their nations, are recognized as a significant outcome of international migration. Nigeria, a prominent recipient of remittances, serves as the focus of this study. The findings unveil that lack of food, security, safety, joblessness, and no income force global immigration to be the only alternative for most people in Nigeria who are not from well-to-do families. The methodology employed in this study is triangulation, which involves comprehensively examining various data sources to reinforce the validity and reliability of the research findings. The research is rooted in the neo-classical theory, delving into global immigration with a specific impact on remittances from their home country.

From Classroom to Portfolio: Examining the Link Between Financial Education, Financial Literacy, and Risk-taking

This paper examines a panel dataset spanning the years 2010 to 2020 across ten countries, investigating the intricate relationship between financial assets and financial literacy. Two prominent trends surface:First, an intriguing inverse association is observed between higher rates of tertiary education attainment within a nation's population and individual financial assets. Second, an upsurge in the employment rate among individuals aged 25-64 corresponds with a decline in individual financial assets. These findings defy conventional research and call for comprehensive exploration within the framework of economic principles and broader economic awareness. As educational attainment and employment rates rise, heightened labor market competition, especially among individuals holding undergraduate or advanced degrees, leads to relatively reduced wages for those with similar qualifications, impacting their financial assets. Furthermore, this study corroborates that while increased income aligns with greater risk aversion, risk preferences display dynamic fluctuations over time and in response to personal experiences, contradicting neoclassical economic theory's concept of perfect stability. These findings underscore the necessity for a nuanced understanding of financial behavior. In summary, this research challenges established assumptions concerning the determinants of individual financial assets, highlighting the significance of multifaceted socio-economic variables and evolving risk perceptions in comprehending contemporary financial behaviors.

An empiric on geopolitical risk and the tourism–economic growth nexus

Purpose This study empirically examines the moderating role of geopolitical risk on the tourism–economic growth nexus by applying a recent geopolitical risk indicator developed by Caldara and Iacoviello (2022) in a cross-country panel data growth model context for a sample of 24 countries.Design/methodology/approach A Dummy Variable Least Squares panel data model, nonparametric covariance matrix estimator and SYS-GMM estimation techniques are employed for the analysis. The authors capture the GPR moderating effect by disaggregating the cross-country sample according to low versus high country GPR score and through a GPR interaction coefficient. Several controls are included in the models such as gross fixed capital formation and—consistent with Barro (1990)—government consumption. Trade openness is used to account for the export-led growth effect. In line with neoclassical growth theory (e.g. Barro, 1991), the authors also include the real interest rate, to account for policy makers' commitment to macroeconomic stability, financial depth, as a proxy for financial development, population growth and the level of secondary school education. The authors also control for unobserved country-specific and time-invariant effects.Findings The research finds that the interaction term of geopolitical risk significantly contributes to the predictive ability of the regression and provides empirical evidence that confirms that only in low geopolitical risk countries international tourism positively and significantly contributes to economic growth. Important theoretical and policy implications flow from these findings.Originality/value The study not only contributes to advancing academic knowledge on the tourism–growth nexus, it also has impact beyond academia. Many countries have in the past pursued and many continue to pursue, tourism specialization and/or tourism-led growth strategies based on the theoretically well-established and empirically validated positive link between inbound tourism and economic growth. The findings alert policy makers in such countries to the significant moderating role that geopolitical risk plays in affecting the above-mentioned relationship and to the importance of prioritizing geopolitical stability as a policy precursor for the successful implementation of such strategies.

The Role of Leadership in Policy Towards domestic decisions and its influencing the formulation of foreign policy

In the process of governance, beliefs and values of civic and religious leaders are utterly significant. In the light of principles of political realism, the politics are commanded by objective laws, the roots of those can be traced to human nature, political behavior of human only depends on human nature. Behavour of human, as a specific political individual, defines his political actions, being a political actor.
 The mission of the following article is to determine the impact of role and decisions of the specific leader on internal politics, as well as international relations context. The subject of research is to explain leader’s particular role in foreign affairs decision making and analysis of leaders’ traits affecting the formation of foreign policy, by theoretical approach of Neoclassical Realism and practical aspects.
 During Researching specific facts of international relations by Neoclassical Realism theory, three levels of analysis are used, first level examining role of leader or leaders, second level explaining internal factors of foreign policy, third level determining systemic factors.
 The aim of this research is, both conceptually and practically, on individual analysis level, to determine the impact of ideological views, values and personal decisions of state or spiritual leader, when dealing with deterioration of relations with strategic partners or crisis.
 Individual, first level of analysis emphasizes on individual, governmental or non-governmental statesman, country leader, whose political values, political weight, behavior, belief, woes, personal decisions affect internal political environment during decision making process, ultimately defining foreign policy and impacts regional and global security context. Theoretical and practical interaction let us explain the degree of impact of individual psychological, ideological, cultural factors, how political actors perceive their and others’ capabilites and how those perceptions translate to foreign policy.
 The research showed, that in today’s volatile international system, personal decisions of regional and global leaders bear significant role and this topic generally, is a vital challenge of security and economy sphere.