Neoclassical Model Research Articles

The impact of minimum wage increases on unemployment in the V4 countries: Assessing the recommendations of the European Commission

The European Commission has recently implemented legislative measures to improve worker protection through an adequate minimum wage set by national laws or collective agreements. A recommended benchmark for minimum wage calculation is 60% of the gross median wage or 50% of the mean wage. However, the Kaitz index, a ratio indicator, shows lower values in most EU countries, raising concerns about potential negative impact on the labour market. This study aims to identify the impact of the Kaitz index and several other selected variables on unemployment in the V4 countries. Using multiple linear regression, we concluded that the Kaitz index’s growth does not uniformly impact unemployment in the V4 countries. Specifically, in Slovakia and the Czechia, the Kaitz index growth appeared to increase unemployment, in line with neoclassical economic theory. In contrast, Hungary and Poland did not register significant effects. Gender differences were also noted, with the Kaitz index affecting female unemployment in the Czechia and Hungary, and male unemployment in Slovakia. The research results suggest that increasing the minimum wage in the V4 countries is feasible if its growth rate is higher than that of unemployment benefits and the living minimum, but lower than the average wage growth, and if it is supported by economic growth.

Firm theories in neoclassical institutional economics

Firm theories in neoclassical institutional economics

The role of finance in production and international trade

We introduce finance in a neo-classical general equilibrium model of production and international trade to integrate the core microeconomic theory with the theory of finance. The stock of credit, as past savings, finances employment and the acquisition of machines or capital goods. The availability of finance or international financial flows does not affect production or trade patterns, except for nominal factor prices, in undistorted competitive structures. However, distortions such as unemployment, imperfect credit markets, and factor mobility do affect real outcomes and trade. Our results are consistent with contemporary empirical evidence and have policy implications for financial development and institutional quality. Numerical illustrations provide further insights.

Markets and Public Goods: Integrity, Trust, and Climate Change

Public goods are an anomaly in neoclassical economics, a form of ‘market failure’. They exist outside the efficient and equitable optimality of market exchange. It can be shown however that competitive markets are only efficient in short product cycles. Long-term objectives require social support. Corruption arises from the consequent private public interaction. Integrity, the absence of corruption, is a public good. Corruption has risen since the 1980s with privatization and outsourcing. How did European governments become honest in the first place? In the century after the 1770s, they moved from regarding public office as a form of private property to a conception of serving the public good. This integrity revolution was facilitated by Weberian bureaucracies, selected by academic merit and committed to impartiality by long-term incentives. The neoliberal revolution of the 1980s regarded bureaucracies as obstructive and slow. It admired the business corporation with its opaque procedures and charismatic leadership. Concurrently economics moved from neoclassical harmony theory to an asymmetric information model of ‘opportunism with guile’, providing doctrinal legitimacy for corruption. Corporate advertising is deliberately deceptive, and undermines the public good of trustworthiness. Digital platforms, powered by advertising, have subverted public discourse. Misinformation and disinformation have become prime risk factors for current societies. The practical operation of markets undermines the public goods of integrity and trustworthiness. The public good of a habitable climate cannot be achieved by market methods. For long-term payoffs, ‘free markets’ are a harmful delusion, inefficient, corrupt, impossible to achieve, and not sustainable.

Driving Factors Affecting the Migration of Young Nursing Care Professionals from Pokhara in a Globalized World: A Hospital Ethnography

Due to unfulfilled expectations in local health-care industry, the participating nurses working in private hospitals in Pokhara were willing to migrate abroad where their aspirations could be met. The irritation, worry, and unhappiness with their career were revealed by the focused-group discussion, in-depth interview, and kuragraphy methods utilized in this study among young nurses in Pokhara. Some of the nurses had already registered for overseas studies and jobs while still working in hospitals and awaiting their visas. As globalization has stimulated the movement of people, the concept of globalization in association with neo-classical and new economic theory of migration, transnationalism, neoliberalism and world-systems from an anthropological standpoint has been applied to analyze the reasons of participant nurses to migrate where the study found that the main reasons for them to migrate were low pay, an uncertain future, a lack of career opportunities, job pressure, and the trend of out-migration. These competent nurses desired to work in core nations have considered semi-periphery as a secondary option. Through the stories of young nurses, this study exposes the dire condition in Nepal’s health-care industry which is motivating nurses to relocate in destination countries resulting brain-drain.

Theorising the effects of EU emigration for origin countries: win-win, dependency or agency?

ABSTRACT Theory on East-West migration and EU freedom of movement reveals a bias towards accounts from neoclassical economics predicting a win-win for destination and origin countries of migrants. To counter the bias, we juxtapose the neoclassical perspective with the dependency school and the state capacity literature. Empirically, we find that benefits of migration occur regarding the effects of remittances yet not for expectations on return and demography as well as GDP development and growth. The two alternative accounts explain better how emigration may aggravate a country's peripheral position in the EU or how countries manage to reverse and limit outmigration.

The macroeconomics of hedging income shares

The debate about the falling labor share has brought attention to the income-shares trends, but less attention has been devoted to their variability. We analyze how their fluctuations can be insured between workers and capitalists, and the corresponding implications for financial markets. We study a neoclassical growth model with aggregate shocks that affect income shares and financial frictions that prevent firms from fully insuring idiosyncratic risk. We examine theoretically how aggregate risk sharing is shaped by the combination of idiosyncratic risk and moving shares. In this setting, accumulation of safe assets by capitalists and risky assets by workers emerges naturally as a tool to insure income shares' risk. Then, in a quantitative exploration we show that low interest rates, rising capital shares, and accumulation of safe assets by firms and risky assets by households can be rationalized by persistent shocks to the labor share.

Some characterizations on isoquants of homogeneous and quasi-sum production functions in microeconomics

Production function is an important concept in neoclassical economics and of great significance in economics and management. In the theory of geometric variations, the minimality of surfaces describes the optimal solutions of energy equations. Due to the nature of minimum energy, beautiful shape and stable structure, the theory of minimal surfaces is widely utilized in the fields of engineering, architecture, physics and molecular chemistry. In this article, we investigate homogeneous production functions and quasi-sum production functions with minimal isoquants, which solves two problems proposed by Neacşu et al. After meticulous calculations, the complete classifications of homogeneous production functions and quasi-sum production functions are reached. The research results interestingly indicate that homogeneous production functions with minimal isoquants are closely related to harmonic functions, which is a classical concept in mathematics and have widely applications.

Green Vulcans? The political economy of steel decarbonisation

ABSTRACT Studies of the political economy of decarbonisation have begun to move beyond the price-centrism of neoclassical economics to explore the role of profits in propelling, or failing to propel, a green transformation. This article pushes this argument further, claiming with Marx that the focus on profits is useful insofar as it leads us to a broader analysis of the capitalist dynamics of competition, overaccumulation, and crisis that any green transition will have to reckon with. This is illustrated through an historical study of the steel industry – a prodigious carbon emitter that must be urgently greened. This article traces the interwoven patterns of crisis and technological change in steelmaking through the nineteenth and twentieth centuries, before drawing out certain core themes that then serve as a lens through which to analyze the prospects of steel decarbonisation today. Since its modern birth, technological revolutions in steelmaking have generated and in turn been conditioned by crises of overaccumulation and restructuring. These same forces are shaping the drive to decarbonise the industry today, as vital green investments are obstructed by reoccurring cycles of overcapacity and weak profitability. Greening steelmaking, and capitalism more generally, means wrangling with this boom-and-bust logic and its political ramifications.

Unemployment and the direction of technical change

I construct and analyze a growth model in which technical change can increase unemployment. I first analyze the forces that deliver a constant steady state unemployment rate in this setting. Labor-saving technical change increases unemployment, which lowers wages and creates incentives for future investment in labor-using technologies. In the long run, this interaction generates a balanced growth path that is observationally equivalent to that of the standard neoclassical growth model, except that it also incorporates a positive steady state level of unemployment and a falling relative price of investment. I also study the effects of a permanent increase in the ability of R&D to improve labor-saving technologies. In the long run, this change leads to faster growth in output per worker and wages, but it also yields higher unemployment and a lower labor share of income. In the short run, this change exacerbates existing inefficiencies and slows economic growth.

Modelling the economy-wide effects of unilateral CO2 pricing under different revenue recycling schemes in Austria – Searching for a triple dividend

In this paper we identify policy implications for implementing carbon pricing in Austria, taking into account model structure uncertainty. Methodologically, we compare the results of two macroeconomic models, DYNK (a New Keynesian model) and WEGDYN-AT (a neoclassical general equilibrium model), to evaluate the effects of carbon pricing under different revenue recycling options. Specifically, we examine the model results with respect to their findings regarding a potential triple dividend, that we define as a simultaneous materialization of i) a reduction in CO2 emissions, ii) positive effects on GDP and employment, and iii) positive and distributionally progressive effects in household consumption possibilities. Accounting for model structure uncertainty improves the robustness of our results; at least within the macroeconomic frameworks applied here. Our results confirm the tradeoff between equity and efficiency identified in previous analyses. In the New Keynesian model, but not in the general equilibrium model, we find evidence for a triple dividend for a combination of the recycling options of non-wage labor cost reductions and lump-sum per-capita transfers (“climate bonus payments”).

Is corporate social responsibility effective in improving environmental quality? Literature review

Considering continuing environmental degradation linked to economic activity, it seems essential to examine the role companies can play in implementing sustainable development. This study aims to analyze lessons learned from standard theories on the effectiveness of corporate social and environmental responsibility. Indeed, corporate social responsibility and state intervention are frequently compared under the dual lens of collective well-being and environmental quality. For some economists, corporate social responsibility is preferable to state intervention from the point of view of maximizing collective well-being. By contrast, according to some other authors, state intervention is more effective for both maximizing well-being and protecting the environment. This literature review shows that corporate social responsibility is theoretically no more effective than public intervention in environmental protection: companies can be encouraged to commit themselves to protecting the environment under restrictive conditions, but this does not eliminate the essential importance of public intervention. Analysis of the assumptions of neoclassical models shows that, in reality, they do not take into account all the properties of a public good, i.e., all the properties of the climate and the environment. Finally, the conditions for implementing CSR are incompatible with maximizing collective well-being, which explains why public intervention is theoretically preferable to CSR.

How does environmental regulations affect digital green innovation of high-pollution enterprises? Empirical evidence from China

Digital green innovation (DGI) is crucial for high-pollution enterprises to improve green performance. However, there is a paradox regarding the impact of environmental regulations on DGI, primarily due to the varied effects of diverse regulatory tools. To resolve this paradox, based on Neoclassical Economics and the Porter Hypothesis, we empirically examine the influence of heterogeneous environmental regulations on DGI using a sample of high-pollution enterprises in China. The conclusions indicate that environmental protection tax has a pushing-forward effect on DGI, while environmental protection subsidy has a crowding-out effect. Moreover, enterprises' resource base and technological innovation capability positively moderate the impact of environmental protection tax. External pressure, internal incentives, pandering to governments, and managerial opportunism have mediating effects. Our research offers a new perspective to resolve the paradox of the effect of environmental regulations on DGI, explores potential mechanism as well as boundary condition, and proposes a new way of measuring DGI of enterprises with patents. Accordingly, we offer valuable policy recommendations about the formulation of environmental regulations, the facilitation of DGI, and the advancement of China's ecological civilization.

Public health events and economic growth in a neoclassical framework

Public health events (PHEs) have emerged as significant threats to human life, health, and economic growth. PHEs, such as COVID-19, have prompted a reevaluation for enhanced regular prevention and control (RPC). In this study, we focus on the core concept of prevention and control intensity (PCI), and establish a neoclassical economic growth model from the long-term and macro perspective to balance life protection and economic growth. The model construct the mechanism of PCI on economic growth through population dynamics and capital accumulation under the backdrop of RPC for PHEs. We find the conditions for PCI when the economy achieves steady state, and provides an algorithm establishing the optimal strategy that maximises per capita disposable income based on the optimal PCI and consumption. Simulation result quantifies an inverted U-shaped relationship between PCI and capital per capita, output per capita and consumption per capita in the steady state. The model suggests that, given the PHEs of inducing potential unemployment shock, it is worthwhile to combine the implementation of moderate PCI with coordinated policies of income distribution.

Poverty in the History of Economic Thought: From Mercantilism to Neoclassical Economics.

Resenha de livro.

Between law and economics: about the scientific heritage of R. A. Posner

The author analyzes the life and scientific heritage of the famous American lawyer and federal judge R.A. Posner. The emergence of the scientific direction and academic discipline “economic analysis of law” is associated with his name. Attention is drawn to the ideological, theoretical and methodological foundations of this direction, associated with the extension of the basic postulates of neoclassical economic theory to the law. This is partly due to Posner’s ignorance of traditional legal issues of justice and his disdainful attitude towards the rule of law. Significant attention is paid to the evolution of the scientist’s views in the 21st century, which is clearly insufficiently paid attention to in domestic literature, especially economic literature. This evolution went in the direction of revaluing the role of the influence of the free market on economic processes and law enforcement practice, recognizing the more important role of irrational principles in human behavior. It is noted that modern researchers of the problems of interaction between law and economics, including the son of the hero of the article, Eric Posner, adhere to more moderate positions based on the equal interaction of law and economics.

On the footsteps of parents? Migration experience and aspirations of university students in Moldova

ABSTRACT This article investigates the impact of parental migration on the migration aspirations of university students in Moldova. Through 24 semi-structured in-depth interviews with university students, the article aims to answer the questions of what shapes the migration aspirations of young students and whether and to what extent their parents’ migration experience impacts this process. The findings show that young Moldovan students are mainly pushed to emigrate by very low living standards, economic and political uncertainty and pulled abroad by better job offers and higher incomes. Highly skilled positions and short-term stays abroad were preferred, corresponding more to the new economics of labour migration concept than the neoclassical economics model. The study results question the validity of the cumulative causation theory, as there was only a mixed indication that parents’ former migratory experience strengthens their child’s pro-migration aspirations.

Neoclassical economics on the edge: Fisher, Knight, and the theory of interest in the 1930s

Irving Fisher and Frank Knight had a brief exchange on the former’s “The Theory of Interest”, published in 1930, which culminated in a full book review by Knight in 1931. We assess the episode by recasting Fisher’s interest theory as a maximisation under constraint calculation. After that, Knight’s objections to subjective time preference are examined, as well as his ensuing attack on the Austrian School’s definition of capital. Fisher’s and Knight’s reflections on business cycles, grounded on expectations, delays, and speculation, are assessed in sequence. We conclude by indicating some limitations of the theories of interest formulated by both economists.

Economic Policies and Their Influence on Livestock Market Dynamics

Purpose: The general objective of the study was to explore the economic policies and their influence on livestock market dynamics. Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library. Findings: The findings reveal that there exists a contextual and methodological gap relating to economic policies and their influence on livestock market dynamics. Preliminary empirical review revealed that fiscal policies, such as subsidies and tax incentives, play a crucial role in reducing production costs and stabilizing market supply. Likewise, monetary policies, including interest rate adjustments, influence investment and innovation within the sector. Trade policies, such as tariffs and free trade agreements, affect market competitiveness and access to international markets. Regulatory policies concerning animal health and environmental protection ensure product quality and consumer confidence. The study emphasizes the need for balanced and well-designed policies across all these areas to support the sustainable growth of the livestock industry. Unique Contribution to Theory, Practice and Policy: Keynesian Economic Theory, Neoclassical Economic Theory and Institutional Economic Theory may be used to anchor future studies on economic policies and their influence on livestock market dynamics. The study significantly advances theoretical understanding by elucidating the intricate relationship between economic policies and livestock market dynamics. It recommends further exploration into the interplay of fiscal, monetary, trade, and regulatory policies to develop comprehensive models predicting market behavior accurately. Practically, the study advises livestock producers to adopt adaptive management practices, staying informed about policy changes and implementing flexible business strategies. Industry associations are urged to disseminate policy information and support farmers in navigating shifts. From a policy standpoint, coherence, targeting, and responsiveness to sectoral needs are underscored, advocating for a holistic approach to policy design. Fiscal policies should support short-term stability and long-term sustainability, targeting critical areas like feed costs and infrastructure. Monetary policies should balance investment stimulation with inflation control, while trade and regulatory policies should negotiate balanced agreements and stringent standards to ensure competitiveness and safety in the global market. Keywords: Economic Policies, Livestock Market Dynamics, Fiscal Policies, Monetary Policies, Trade Policies, Adaptive Management Practices, Industry Associations, Policy Coherence

TOWARDS AN EVOLUTIONARY ECONOMIC THEORY

Today, the neoclassic economic theory still dominates the economic analysis, prediction, and even public economic policy, encouraged, unfortunately, by the career criteria in science and education fields. In such a context, the objectives of the paper are: (1) to systematize the findings related to the unrealism and theoretical and methodological mistakes of the economic neoclassic model; (2) to argue about the desirability, reliability, realism, and efficaciousness of an evolutionary model of the economy (and of Economics); (3) to draw the basic lines which an evolutionary economic theory could be edified on, starting from both the statu quo in the matter and the logical examination of the question. The approach of research is a mix between logical and historical (but not empirical) views regarding the evolutionary economic model/theory. The main results are: (a) arguing on the possibility of crystalizing the basic concepts of an evolutionary economic model; (b) making proposals for the evolutionary economic mechanism (in its abstract understanding – as cybernetic system of order 3); (c) warning on the risks of a tale quale taking over of the evolutionary concepts from Biology; (d) identifying the principles to be followed in building up of an evolutionary economic theory.