Neoclassical Model Research Articles

Regional economic growth and post-Keynesian economics: unfit for purpose?

This paper sets out to critically analyze the ways in which economic growth theories have been engaging with the regional, or sub-national, aspect of economic growth. Although mainstream theories are also assessed, the primary focus is on post-Keynesian growth theories, and particularly on a regional branch of the Kaldorian literature. First, key notions, such as methodological individualism, methodological nationalism, and emergent properties are presented, and how they are related to both neoclassical and post-Keynesian economics. Second, the paper critically presents mainstream theories and their shortcomings in tackling regional aspects of economic growth. Third, the Kaldor-inspired literature on regional growth is critically discussed. While this Kaldorian literature presents itself as critical of mainstream theories in general, its treatment of the spatiality of economic growth remains cursory. This paper is intended to provide a constructive and sympathetic critique of the post-Keynesian literature in general, and the Kaldorian literature in particular; its key objective is to call post-Keynesian researchers’ attention to some of the literature’s deficiencies, to indicate areas of synergy between post-Keynesian economics and evolutionary economic geography, and to suggest a new and promising interdisciplinary research agenda.

Methodological tools of consulting companies for evaluating the effectiveness of organizations.

The article is devoted to a comparative analysis of existing opportunities and directions for evaluating the effectiveness of organizations using the resource-cost method (static model), Pareto optimality and the dynamic standard method (dynamic model). The purpose of the study was to identify the content of alternative approaches and models used by consulting companies to determine the effectiveness of organizations that produce and sell goods and services. The methodology described in the article is based on neoclassical economic theory. In the course of the work, a conceptual analysis of significant scientific alternatives to static and dynamic models for assessing economic efficiency was carried out. Any of them (or a combination of them), as established by the authors of the study, can be equally applied in the activities of all economic entities, including consulting companies. The results obtained include the definition of a set of methodological tools within the framework of the resource-cost method, the Paretian optimum and the dynamic standard method; substantiation of the equivalence and mutual complementarity of scientific model alternatives to efficiency, the interaction of the process and the result of efficiency assessment based on the principle of complementarity; evaluation of the organization’s activities in a static efficiency model as an example of the implementation of the principle of complementarity. The results of the study can be applied both in the practice of management consulting and regular management of the organization.

Two Traditions in the Conceptualisation of Competition

This article adopts a history of economic thought approach in examining the conceptualisation of competition and its development and role in different theoretical systems. Taking the nonlinear view of knowledge, this article identifies two distinct and different theoretical systems—classical political economy and neoclassical economics (brought through the marginalist revolution in the late 19th century). This article argues that classical political economy had a notion of competition as a dynamic process irrespective of the market structure (number of participants in the market). For classical economists, competition was conceptualised as the perfect mobility of resources, establishing a tendency towards uniform prices or rates of return to commodities, assets and labour that are identical in all economically relevant respects. Competition was operationalised through the theoretical idea of natural prices; in fact, competition is the method of abstraction employed by classical economists to study basic economic processes. Meanwhile, in neoclassical economics, the concept of perfect competition depends on the number of participants in the market, with imperfections introduced only as deviations from the idealised benchmark.

Is the Study of Development Humiliating or Emancipatory? The Case Against Universalising ‘Development’

AbstractThere are increasing calls to universalise the study of development to include the study of countries outside Asia, Africa and Latin America. This paper argues that there are reasons to be sceptical of such calls. This paper highlights that a surprising alliance has emerged between neoclassical economists (especially those who have long rallied against the need for a separate field of ‘development’ economics) and post-development scholars (who argue that the study of ‘development’ denigrates the Global South) in making the case to universalise the study of development. Global Development proponents tap into popular decolonisation narratives, which focus on the humiliating nature of ‘development’ and ignore any ‘emancipatory’ potential development may have. By only focussing on the humiliating aspects of ‘development’, the case for universalising development binds post-development scholarship and neoclassical economists in a common universalist focus on development challenges. This marginalises scholarship concerned with reducing inter-country inequalities in structural transformation and combatting dependencies between industrialised and non-industrialised countries.

War and Economic Growth: An Analysis Based on Extended Solow Model

ABSTRACT This paper presents an analysis of the dynamics of economic growth in war and post-war periods. For this purpose, we introduce an extended neoclassical model of economic growth with the civilian and military production sectors which is based on the Solow model. The war period is characterized by gradual transfer of capital and labor from the civilian sector to the military sector. The negative impact of war on capital stock and population is also examined. We find that war has only a transient effect on a long-run equilibrium. However, its short-run dynamics is determined by initial conditions imposed on the economy at the beginning of war and the characteristics of the war itself.

Research on the Analysis Model of Regional Economic Growth Differences in China Based on Big Data and Intelligent Algorithms

China’s growing economy contributes significantly to worldwide consumption. Economic rebalancing promises opportunities for manufacturing exporters, and that can weaken commodity demand in the long term. China exerts increasing influence on emerging countries through trade, investment, and ideas. China faces several important economic issues that can hinder future development, including distortive economic policies that have evolved into an overreliance on fixed investment and exports for economic growth, government assistance for state-owned businesses, and a weak banking system. Building an information infrastructure and enhancing the technical level and application capability of big data (BD) remain under the purview of the Chinese Government. Artificial intelligence (AI)-based hybrid artificial neural network (HANN) might boost total factor productivity by a large margin, influencing many sectors in China in ways that official statistics would miss, including changes to the labor market, investment patterns, and overall productivity. Hence, BD-HANN has a coefficient of variation, quantity graph analysis, standard deviation, and entropy index, some of the most conventional quantitative research tools used to examine disparities in regional economic growth. According to the neoclassical growth model, regions with lower starting values of the capital-labor ratio anticipate higher per capita income growth rates. Thus, poor areas will grow faster than rich ones, assuming that the only difference between regional economies is the level of their initial stock of capital.

The Marshall–Fetter controversy over the ‘old rent concept’

Abstract Alfred Marshall’s theory of rent was a watershed moment in economics, and his ideas on the subject continue to (positively and negatively) influence economists and social scientists well into the twenty-first century. Far less well known is the scathing critique of Marshall’s theory published by Frank A. Fetter in the Quarterly Journal of Economics in 1901. Fetter identified several concepts of rent in Marshall’s work that he attacked as contradictory, arguing that Marshall embraced classical errors while still attempting to emancipate himself from them. Marshall responded by adding a critical note on Fetter to the 5th edition of his Principles (1907), but otherwise showed little public interest in a reply. However, archival evidence reveals that both Marshall and Fetter took this dispute seriously and personally, and that they continued to debate each other at a distance for several decades. This paper brings to light previously unknown archival sources—including unpublished notes, correspondence and manuscripts—to tell the full story of their controversy. Doing so sheds new light on the work of both men and adds in several ways to our understanding of the early history of neoclassical economics, of the development of the theory of rent and of theoretical paths not taken.

The Effects of the Demographic Crisis on Economic Growth from 1980 to 2022 in Bulgaria

The demographic crisis in Bulgaria, marked by the shrinking population, has significant implications for economic growth. This study examines these effects from 1980 to 2022 through the lens of neoclassical economics and empirical modeling. While the crisis is usually associated with negative consequences, the article reveals a potentially counterintuitive phenomenon: the overestimation of labor productivity, estimated at nearly 60% and caused by the demographic crisis, leads to the so-called “growth illusion”. The article shows that the demographic crisis artificially inflates productivity indicators, thus concealing the poor quality of production and threatening long-term economic stability. The results highlight the need for policies to address the structural challenges of the labor market and the confirmed overestimation of its productivity.

FINANCE DOGMAS AND NEOCLASSICAL MEMORIZATIONS IN MAINSTREAM ECONOMICS: EXAMPLES OF MILTON FRIEDMAN, EUGENE FAMA AND NOBEL

Purpose- During the post-pandemic exit period, while the Russia-Ukraine War was ongoing and the earthquake disaster was following, the fiscal policy in which macroprudential measures were implemented between December 2021 and May 2023 was frequently criticized in the mainstream and accused of being unscientific, claiming that it was an economic experiment (and heterodox economic literature was excluded or ignored). It was claimed that the economy would get back on track with a return to orthodox monetary policy and rationality. In the past period, when the inflation rate remained higher at the end of 1.5 years compared to May 2023, it is claimed and said by the mainstream that the money supply and public expenditures (fiscal policies) did not accompany the monetary policy. Therefore, it is claimed that the household's belief in inflation did not decrease (inertia) and they are not reducing their expenditures because of that situation. It was generally said (especially in social media posts and TV market channels) that locals (in academy and business the right usage is residents) did not act rationally by fueling inflation, especially service inflation, along with the minimum wage increase. (The name) “The Nobel Prize in Economics” and the beliefs and discourses in mainstream economics such as "the money supply is always and everywhere inflationary", "people and investors are rational" and "the importance of institutions in economic development and progress" are actually very different as declined/corrrected from/by its own sources, hence it was intended to be shown with scientific references and sources. Methodology- In this study, examples were examined through a summary literature review and it was shown that neoclassical memorization and dogmas were corrected by the owners (itselves) of these discourses, arguments and hypotheses, and were different from what is known in the mainstream (economics). In this way, it is a qualitative and conceptual study. Findings- Friedman, Fama and members of the Nobel Family corrected and rejected their own statements (hypotheses) and the facts mentioned in this study. Conclusion- The inflation-money supply relationship, the inflation and the investment relationship with (ir)rational households and investors, prize-winning theories such as the relationship between development and inflation, and real per capita income can still find firm supporters and a place in the mainstream and neoclassical understanding, although they have been revised by their main resources who first issued them. Although there are immutable rules in economics and finance, the financial policies implemented depending on the period and/or the dynamics of the countries may differ, and even if the policies are the same, the results may differ. While ignoring a (heterodox) literature in economics, not being aware of the developments and updates in the (orthodox) literature regarding the other (claimed as rational) understanding defended may not lead the proposed prescriptions and thus their results to the desired direction. In Türkiye, parallel to the World, these acceptances in mainstream (neoclassical) economics are a bitter prescription and cannot be a solution in the new economy. When data and graphs are presented by detaching them from the context of the facts and events of the relevant period, this is not economics but statistics (Dirican, 2024a). Keywords: Money Supply, Efficient Market Hypothesis, Inflation, Nobel Economy Prize, Milton Friedman, Eugene Fama JEL Codes: E13, E44, E51, E71

Economic Growth with Nonrenewable and Sustainable Energy

Optimal depletion of nonrenewable energy added to the neoclassical model dampens economic growth as its price rises at the rate of the capital return. The present paper introduces sustainable energy requiring its own capital with the Inada condition requiring both energy inputs are necessary for production. Production is developed in terms of factor shares and price elasticities. Investment in sustainable energy offers relief from the rising nonrenewable price but lowers consumption or capital growth. Simulations of the U.S. economy foresee a smooth transition with growth paths depending on the two saving rates and factor price substitution.

Updating neoclassical economics with contemporary conceptions of homo economicus: a bibliometric analysis

AbstractThe postulation of rationality pervading neoclassical economics, having found to be lacking in veracity, necessitates an update of Homo economicus in neoclassical economics. An empirical formulation of economics predicated on an evolutionary framework of cognitive development is widely akcnowledged to expand the application and utility of economic models and this study identifies the key research areas associated with the contemporisation of neoclassical economics and reviews the extant body of knowledge on the status of the endeavour. A co-occurring keyword procedure is used to perform a bibliometric analysis to evaluate the extent to which the body of knowledge has progressed with updating the conception of Homo economicus in neoclassical economics. Data obtained from the Scopus and Web of Science databases are subjected to treatment by the procedure which ultimately reflects the relevance and quantity of research output related to the objective of updating neoclassical economics. The results show that, apart from the area of cognitive biases, the research contribution from the identified focus areas are insufficient with 14 of the 18 fields contributing only 12% of the research ouput related to the updating of neoclassical economics. The key insight of this study is that while the failures of neoclassical economics have been well documented in the literature, the effort to improve economic predictions to better approach reality by updating the characterisation of Homo economicus with evidence based findings relating to human behaviour is still immature. It is recommended that the computational and analytical tools endowed by the digital revolution be employed to close the research gap enabling the creation of debiasing strategies and acucrate economic predictions.

The Contribution of Total Factor Productivity on Economic Growth in Selected Southeastern European Countries

This paper delves into the impact of capital accumulation, effective employment, and total factor productivity (TFP) on the economic growth of five Southeastern European countries: Albania, Croatia, North Macedonia, Serbia, and Slovenia. The examination is based on the Solow-Swan neoclassical growth model and the Cobb-Douglas production function, which dissects economic growth into capital, labour, and productivity inputs. The analysis pays particular attention to the growth dynamics of North Macedonia over the entire period (1998-2019) and two sub-periods (1998-2008 and 2009-2019). The article seeks to provide a comprehensive evaluation of the primary drivers of economic growth in Southeastern European countries, emphasising the evolving roles of capital, labour, and productivity over time. Through a detailed analysis of these determinants, the study offers insights into the necessary policy actions to ensure sustainable long-term growth, especially in transition economies. The empirical analysis utilises the growth accounting framework and employs regression analysis to estimate the output elasticities of capital and labour inputs. The data analysis covers the period of 1998-2019, specifically focusing on two sub-periods to investigate shifts in growth drivers over time. Each factor's contributions are presented in absolute terms (percentage points) and relative terms (percentages) to provide a comprehensive understanding of their roles. The findings indicate that capital accumulation has been the predominant growth driver in most countries, especially Albania, Croatia, and North Macedonia. However, in Serbia and Slovenia, total factor productivity (TFP) played a more significant role, contributing substantially to growth. In North Macedonia, TFP showed strong contributions during 1998-2008 but declined sharply in 2009-2019, leading to increasing reliance on capital and labour inputs for growth. This study is valuable in emphasising the shift in growth drivers over time and highlighting the importance for Southeastern European countries to concentrate on productivity enhancements, innovation, and labour market reforms to sustain long-term growth. These findings provide significant insights for policymakers seeking to improve economic performance in transition economies.

Trade openness, telecommunication infrastructure, institutions and economic growth nexus: The case of landlocked African countries

This research analyses the effects of openness, telecommunications, and institutional nexus on economic growth in African countries using a panel model with data from 16 landlocked countries from 1996 to 2021 and employing the pooled mean group estimation technique that mitigates bias from country heterogeneity and discerning short-term and long-term equilibrium dynamics and two-step system-generalized method of moments (GMM) estimation for robustness check. The empirical findings indicate that openness exerts a significantly positive effect on economic growth in the models. This supports the neoclassical model, suggesting that being landlocked should not impede economic growth, but rather, growth should depend on opportunities available to each country. However, institutions and telecommunications show a mixed correlation with economic growth. These findings can guide landlocked developing countries in enhancing their exports and fostering skill acquisition to attract advanced technology. In conclusion, policymakers should improve macroeconomic policies, telecommunications infrastructure, and institutional structure to strengthen the sustainability of economic growth in African landlocked countries.

Time-dependent full-radius integrated modeling of the DTT tokamak main plasma scenarios

Abstract We use an integrated modeling workflow with the transport code ASTRA coupled with the quasi-linear transport model TGLF-SAT2, the neoclassical model NCLASS, the FACIT model for the neoclassical impurity transport and the IMEP routines for the pedestal calculations, in order to predict the evolution of the plasma profiles for the Divertor Tokamak Test facility (DTT) tokamak main scenarios. The simulations cover the whole confined plasma radius, up to the separatrix, and the time evolution of the plasma including the early phase in limiter configuration, the whole current ramp-up phase in L-mode divertor configuration, the L–H transition and part of the stationary H-mode phase. Six fields are predicted, i.e. the ion and electron temperatures, the electron density, two impurity densities and the plasma current. The simulations indicate that the main DTT scenarios are within the technical capabilities of the machine. They also indicate that the DTT full power, full current, full field scenario will be able to operate in H-mode with a duration of the flat-top phase of the order of ∼ 30 s, and plasma parameters allowing a core-edge integrated study of the power exhaust, which is the main mission of the device. The simulations show also a strong flexibility of the DTT plasmas, that allows DTT to study reactor-relevant conditions unexplored by existing tokamaks.

Promoter Ownership and Leverage: An Empirical Evidence of Agency Problem in Select FMCG Companies

The study examines the association between promoter ownership and leverage of Fast Moving Consumer Goods (FMCG) companies listed at BSE in the ‘A’ category. The FMCG Industry is a vital sector for the Indian economy. Leverage decision is a critical financial decision. In the year, 2020 the revenue of the FMCG market was USD 110 billion. The study tries to investigate the impact of promoter shareholding on the leverage decision of Indian FMCG companies. The study is conducted on a sample of 46 companies and the study period ranges from 2017-2022 for 5 years. The study conducted A panel data model is opted for data analysis. The study also conducted a diagnostic test to further check the reliability of the data. The study indicated a significant positive association between ownership structure and leverage. Due to the existence of agency problems, the leverage decisions deviate from neoclassical models. The study’s finding adds to the extant literature on promoter ownership. The positive relationship indicated the existence of an agency problem. Firm executives should try to reduce Agency problems to enhance firm performance.

Lifelong learning paradigm and socioeconomic sustainability: towards employment growth of vocational trainers in Pakistan

PurposeInspired by the neoclassical economic theory and endogenous growth theories, where former studies suggest that the economic growth of a country can be observed through the combination of three factors. Those three factors include capital, the number of labour forces (human capital) and technology. This research was initiated to study the impact of technical and vocational education and training (TVET) sector on the socioeconomic and employment growth of TVET trainers in Pakistan, which is also supporting the Sustainable Development Goals (SDGs).Design/methodology/approachIn this study, quantitative research methods and survey research design have been used. Data were collected using an adapted survey questionnaire from 520 participants. The participants of this study were TVET trainers from different skill-based organizations. Whereas, the collected data was analysed using SPSS 27.0, and the Spearman correlation was used to analyse the relationship and strength of association between the constructs.FindingsFindings of this study indicate that the skill-based education through the TVET sector has a highly positive impact on TVET trainers’ employment, socioeconomic growth of vocational trainers and quality standards of living of the TVET trainers. Whereas, the findings also revealed that this skill-based education has a relatively weak relationship with the traditional content-based education as compared to other targeted variables in the skill development sector which influence the socioeconomic growth of the TVET trainers in Pakistan and similar contexts.Practical implicationsThis study highlights that the TVET has a significant impact on the socioeconomic growth and development of TVET trainers in the context of Pakistan. From the results, international agencies, economists, politicians and policymakers in Pakistan will get some valuable insights to develop policies accordingly which will promote TVET in the country and make a significant contribution to the socioeconomic growth of TVET trainers in particular and the country in general.Social implicationsThis study also promotes the economical sustainability and value creation among vocational education trainers in TVET and skill-based organizations to further strengthen their professional development and growth in Pakistan.Originality/valueThis is one of the few studies which specifies the impact of the skilled-based education and training sector on the socioeconomic growth and development of TVET trainers in Pakistan, particularly in rural contexts or less privileged areas.

Perfect Competition and Competitive Dynamics in Europe; Analysing the Gap Between Theory and Reality

Abstract While the construct of market is one of the basic concepts in Economics, the term competition became the elemental paradigm in apprehending the organisation of markets. For economic assessment, it is crucial to understand how markets are organized, how they function, and how firms operating within them behave. Economists remain interested in how different market structures and the concentration of sellers affect market prices and quantities. Long before the advent of neoclassical economics and its equilibrium in a perfectly competitive economy, Adam Smith advocated for competitive markets as the preferred market structure because they lead to socially optimal economic outcomes. This concept essentially encapsulates the entire theoretical background of microeconomics. There are numerous arguments for clarification of the EU competitions rules as some of them are pointed at improving market efficiency for the benefit of consumers while others are driven by purely political and/or competitiveness scrutiny. Hence, the goal of this study is to test perfect competition conditions and therefore the competitive dynamics among European countries, as to analyse the disparity between the theoretical positions and empirical reality. Evaluation is based on testing the equality of prices and marginal cost in the long run, as well as in the short run within a panel structured sample of 38 European countries for the period of 1960-2022. Various estimation methods indicated the absence of the equality between prices and marginal costs across the panel sample and different sub-samples, but with the presence of long term cointegration between these variables, indicating that these variables share a common long run trend.

Is tourism specialisation a trap for economic growth? The case of the Italian regions

ABSTRACT Tourism activity is a pivotal driver of global economic growth in an era of globalisation. Yet, its ecological footprints call for urgent sustainable practices. This paper enriches intricate interconnections between tourism, economic growth, and sustainability. Novel insights bridge gaps in understanding the effects of domestic and international tourism, regional heterogeneities, and spill-over effects, focusing on Italian regions (2004–2019). Based on a new neoclassical model, this study integrates key indicators beyond Gross Domestic Product and physical capital, encompassing sustainability (renewable energy) and human capital within the KLEM (Capital, Labour, Energy, Materials) specification. These frameworks assess multifaceted dynamics and raise questions about whether high tourism specialisation can lead to a trap for economic growth, development and, ultimately, socio-economic inequalities. Significantly, the research uncovers notable regional heterogeneities, and spill-over effects, shedding light on distinct economic trajectories and challenges, triggering the pursuit of resilience strategies. By highlighting intricate tourism-economy-sustainability connections, this study advances sustainable tourism understanding, urging a delicate balance between tourism's economic benefits and ecosystem concerns. It emphasises the need for eco-conscious practices and economic diversification to ensure harmonious development, aligning with the SDG agenda (UN, 2024).

The Labour Market for Immigrants: Evidence from Data

This article verifies how regular migrants are inserted into the labour markets of receiving countries. The analysis will be made with reference to the position of neo-classical economists relating to the insertion of immigrants in the labour markets of host countries. Reference will also be made to existing data on the dynamics of the integration of authorized migrants in the labour force of OECD and EU countries.

Corruption and emigration from the Western Balkans: evidence from a dynamic system GMM model (2012-2022)

According to neoclassical models, migration takes place when there is a strong probability that individuals will recoup their human capital investments. As a result, workers typically move from low-income to high-income areas and the larger the expected income gap between areas, the higher the number of migrants. In countries where corruption is endemic, jobs are often secured through political connections and bribes. This will lead to a higher unemployment level as well as to a lower return to human capital. Consequently, a significant proportion of the population considers emigration as the only path to succeed. The present study is focused on the impact of corruption on emigration from six Western Balkan countries. A System Generalized Method of Moments is estimated to analyze migrant stocks in 28 receiving countries during the period from 2012 to 2022. We suggest that corruption can directly influence migration stocks in receiving countries.