Jochen Hartwig

Testing the growth effects of structural change

Against the backdrop of Baumols model of ‘unbalanced growth’, a recent strand of literature has presented models that manage to reconcile structural change with Kaldors ‘stylized fact’ of the relative constancy of per-capita real GDP growth. Another strand of literature goes beyond this, arguing that the expenditure shifts toward Baumols ‘stagnant’ sector stimulate rather than dampen long-term economic growth because of the human capital-accumulating nature of major ‘stagnant’ services (like health care and education). This paper tests the relationship between structural change and economic growth empirically by means of a Granger-causality analysis of a panel of 18 OECD countries.

Keynes's multiplier in a two‐sectoral framework

This paper endeavours to reinterpret one of the most fundamental concepts of macroeconomics: the Keynesian investment multiplier. The multiplier is not interpreted as a dynamic process (or quantity reaction of output) nor as a logical relation (or ratio) between income and investment expenditure, but as an equilibrium condition that prescribes the proportionality between the two ‘departments’ of the economy (the consumption‐goods and the investment‐goods sector) necessary for ‘completely successful reproduction’. The Marxian concept of reproduction schemes is combined with Keyness ‘fundamental psychological law’ (which states that the marginal propensity to consume is positive and less than unity) to derive this result. This ‘structural’ view of the multiplier is then used to analyse questions relating to economic growth, capital accumulation and structural change.

TESTING THE BAUMOL–NORDHAUS MODEL WITH EU KLEMS DATA

Baumols (1967) seminal model of structural change predicts that large service industries financed mainly through taxes and social contributions - like health care and education, for instance - will acquire ever-larger shares of total expenditures and that, concomitantly, overall productivity growth will decline. Applying a new testing strategy for Baumols model, Nordhaus (2008) finds strong evidence in favor of the “cost and growth diseases” in U.S. GDP-by-industry data (published by the Department of Commerces Bureau of Economic Analysis). The aim of the present paper is twofold. The first is to check whether Nordhauss results can be reproduced using U.S. industry data from the EU KLEMS database. Second, Nordhauss testing methodology is applied to European Union data from the same database. The results suggest that - although there are differences vis-a-vis the U.S. - the EU also shows symptoms of “Baumols diseases.”

Robust determinants of health care expenditure growth

Our aim is to disclose robust explanatory variables for health care expenditure (HCE) growth by introducing to this field of research a method that is especially well suited for situations of ‘model uncertainty’: the Extreme Bounds Analysis (EBA). We analyse data for 33 OECD countries over the period 1970–2010 and include – as far as it is statistically feasible – all macroeconomic and institutional determinants of HCE growth in the EBA that have been suggested in the literature. Furthermore, we analyse to what extent outliers in the data influence the results. Our results confirm earlier findings that GDP growth and a variable representing Baumol’s ‘cost disease’ theory emerge as robust and statistically significant determinants of HCE growth. Depending on whether or not outliers are excluded, we find up to six additional robust drivers: the growth in expenditure on health administration, the change in the share of inpatient expenditure in total health expenditure, the (lagged) government share in GDP, the change in the insurance coverage ratio, the growth in land traffic fatalities and the growth in the population share undergoing renal dialysis.

On spurious differences in growth performance and on the misuse of National Accounts data for governance purposes

ABSTRACT The paper ventures forward into the largely unknown terrain of the political economy of statistical measurement. National Accounts data are shown to be indispensable for economic governance, yet, it is argued, they can also be misused in this context when spurious conclusions about economic policy are drawn from spurious differences in growth performance. That the US economy grows faster than most European economies since the mid-1990s is widely accepted as a stylized fact; and this had a strong impact on policy reform debates in Europe over the last decade. The paper questions the legitimacy of this debate by calculating the proportion of the US lead in growth over the European Union that can be explained simply in terms of differing statistical methods.

Distribution and growth in demand and productivity in Switzerland (1950--2010)

I investigate whether demand growth and productivity growth in Switzerland have benefitted from the wage moderation that set in at the beginning of the 1990s in this country. The results suggest that the Swiss demand regime is profit-led while the productivity regime is wage-led. This means on the one hand that wage moderation has added almost one Percentage Point to Gross Domestic Product (GDP) growth after 1990. On the other hand, it has also contributed to the drop in productivity growth. The latter effect, however, is weak.

A Panel Granger-Causality Test of Endogenous vs. Exogenous Growth

The paper proposes a new test of endogenous vs. exogenous growth theories based on the Granger-causality methodology and applies it to a panel of 20 OECD countries. The test yields divergent evidence with respect to physical and human capital. For physical capital, the test results favor Solow-type exogenous growth theory over AK-type endogenous growth models. On the other hand, the test results lend support to human capital oriented endogenous growth models - like the Uzawa-Lucas model - rather than to the human capital augmented Solow model.

Beyond the Market Paradigm: on Keynes's Principle of Effective Demand, and on the Irrelevance of Rigidities for His Explanation of Involuntary Unemployment

The paper argues that Keynes’s General Theory has introduced an employment theory that does not rely on the (labour) market paradigm. The term ‘market paradigm’ is defined, and previous critical evaluations of it in the secondary literature are discussed. The core of the paper is section two, which offers a reinterpretation of Keynes’s Principle of Effective Demand in order to show that this principle presents an explanation for the level of employment alternative to supply and demand forces in the ‘labour market’.

Aggregate Demand and Aggregate Supply: Will the Real Keynes Please Stand Up?

Two recent articles in this journal present conflicting interpretations of the Aggregate Demand/Aggregate Supply (D/Z) model contained in Chapter 3 of Keyness General Theory. This paper evaluates the two interpretations to determine which aligns more closely with Keyness own views.

Introduction to the Symposium

This paper is one of three contributions to a symposium commenting on papers previously published by the other authors. Allain (Allain, O. (2009) Effective demand and short-term adjustments in the General Theory, Review of Political Economy , 21, pp. 1--22) argues that Keynes elides a distinction between aggregate demand and global expenditure that is necessary to explain the formation of price expectations by individual entrepreneurs. Allains conclusions depend upon redefinitions of aggregate and effective demand and the consumption function. Hartwig (Hartwig, J. (2007) Keynes vs. the Post Keynesians on the principle of effective demand, European Journal of the History of Economic Thought , 14, pp. 725--739) argues that entrepreneurs must take into account the state of the economy as a whole, in order to form price expectations independently and not as a market equilibrium determined by aggregate supply and demand. This leaves demand price expectations to be determined outside the principle of effective demand. Neither author does full justice to Keyness own treatment. We still need to agree by what mechanism individual entrepreneurs form a collective and mutually consistent state of expectation in The General Theory . (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abs (This abstract was borrowed from another version of this item.)