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Time: 4.00pm - 6.00pm
Venue: Room 4006, John Galsworthy building, Penrhyn Road campus, Penrhyn Road, Kingston upon Thames, Surrey KT1 2EE
Please join us for this event as part of the Economic Department Research Seminar Series.
‘The impact of spending policies for the provision of public services on functional and household income distribution in OECD countries' by Nicola Pensiero (University College London).
The literature that analyses the distributional effects of government spending policy has showed that social spending redistributes in favour of the worse-off and tends to reduce inequality overall, yet little is known regarding the distributional role of government as an employer and provider of services. This paper analyses this role, focusing on both functional (labour share of GDP) and household income distribution in developed countries. Over the past decades the involvement of private firms in the provision of public services has grown. It can be argued from a political economy point of view that expenditures on government jobs can ameliorate inequality because government wages are relatively compressed and exert spill-over effects on private wages; by contrast, acquiring goods and services from private firms can lead to greater inequality if within the funded firms, capital is substituted for labour and jobs are relatively low paid. Those arguments are assessed using panel regression techniques on data on 19 OECD countries for the period from 1985 to 2010. The results show that while spending on outsourcing intermediate inputs to private firms has no effect on income inequality and detrimental effects on the labour share, government wages contributed substantially to increase the wage share and to reduce household income inequality. Those results suggest that if the goal is to reduce inequality, a public employment-led spending policy should be pursued. Such a policy strategy can be combined with larger investments in capital formation, which have the effect of reducing economic inequality.
'Is the market really a good teacher' by Dany Lang (Université Paris 13).
This paper proposes to model market mechanisms as a collective learning process for firms in a complex adaptive system, namely Jamel, an agent-based, stock-flow consistent macroeconomic model. Inspired by Alchian's (1950) "blanketing shotgun process" idea, our learning model is an ever-adapting process that puts a significant weight on exploration vis-à-vis exploitation. We show that decentralized market selection allows firms to collectively adapt their overall debt strategies to the changes in the macroeconomic environment so that the system sustains itself, but at the cost of recurrent deep downturns. We conclude that, in complex evolving economies, market processes do not lead to the selection of optimal behaviours, as the characterization of successful behaviours itself constantly evolves as a result of the market conditions that these behaviours contribute to shape. Heterogeneity in behaviour remains essential to adaptation in such an ever-changing environment. We come to an evolutionary characterization of a crisis, as the point where the evolution of the macroeconomic system becomes faster than the adaptation capabilities of the agents that populate it, and the so far selected performing behaviours suddenly cease to be, and become instead undesirable.
Nic Pensiero is a sociologist at LLAKES Centre for Research on Learning and Life Chances, UCL Institute of Education, where he joined in 2013 after completing his PhD at the European University Institute. His general interests lie in stratification and inequality, education and political economy. His research focuses on skills, education systems, and social class. He has published articles in Oxford Review of Education, Comparative Education Review, British Educational Research Journal. More recently he has developed an interest in the distributional impact of spending policies. He has provided consultancy for UK government departments and agencies, as well as for European Commission.
Dany Lang is associate Professor at U. of Paris 13, Sorbonne Paris Cité. He is the coordinator of axis 1, "globalization, finance and income distribution" and of the task group "International macroeconomics and Post-Keynesian analyses" at the Center of Economics of Paris North (National Center for Scientific Research). Dany Lang's researches are mainly on growth, unemployment and employment issues, as well as on the importance of time in economics. More recently, he has developed agent-based models. He is one of the French proponents of the employer of last resort.
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Contact: Antoine Godin
Directions to Room 4006, John Galsworthy building, Penrhyn Road campus, Penrhyn Road, Kingston upon Thames, Surrey KT1 2EE: