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Unions, Growth and Inequality in a Schumpeterian Economy
Get PDFThis paper explores the dynamic effects of labor unions on economic growth and income inequality in a Schumpeterian growth model with heterogeneous households and endogenous market structure. A representative labor union bargains with a representative employer to determine the labor income share and employment level. We find that, in the short run, an increase in union bargaining power reduces economic growth and income inequality when the union is wage-oriented. In the long run, while stronger union bargaining power continues to reduce income inequality, it does not affect the steady-state growth rate due to endogenous market structure adjustments. To conduct a quantitative analysis, we calibrate the model using U.S. data. Our findings indicate that increasing union bargaining power from the 2016 level to the 1980 level would reduce the welfare of the top 30% of households, with significantly larger welfare losses for higher-income groups. Conversely, the bottom 70% of households would experience welfare gains, which are disproportionately larger for lower-income groups
From Crisis to Opportunity: Advancing Solar Energy in Lebanon Through Effective Policymaking
Get PDFLebanon faces an enduring energy crisis, characterized by persistent electricity shortages and an overreliance on polluting self-generation methods, particularly in urban areas like Beirut. Despite the lack of proper policy support, solar electricity adoption has increased significantly since 2020. This rise is driven primarily by the widespread distrust in the public utility and government, reduced costs, and growing public awareness of pollution and health concerns. This policy brief proposes reducing import red tape measures and exempting solar panels and related accessories from customs and VAT taxes. This initiative aims to encourage the adoption of renewable energy solutions, reduce pollution, and alleviate the electricity supply crisis, thereby contributing to a more sustainable and resilient energy future for Lebanon. Additionally, the brief addresses issues of equity and the just transition to renewables, ensuring that the benefits of solar energy are accessible to all segments of society, particularly vulnerable populations. By implementing these measures, Lebanon can promote an inclusive and fair energy transition, enhancing the quality of life for its citizens and mitigating the environmental impact of its energy consumption
Symmetric Model of Economic Equilibrium: Dialogue with Artificial Intelligence
Get PDFThe book Symmetric Model of Economic Equilibrium: Dialogue with Artificial Intelligence is a unique experiment that blends economic theory with cutting-edge technology. It consists of a record of dialogues between the author and the artificial intelligence system Grok 3, with the central theme being the exploration of the Symmetric Model of Economic Equilibrium. This model introduces a novel perspective on the economy as a self-regulating system, where micro- and macro-levels are interconnected through cyclical flows and feedback loops, ensuring its integrity and adaptability. The book includes chat sessions in which the AI evaluates the model‘s mathematical rigor, economic logic, and practical significance. It examines the model‘s advantages over traditional approaches and its potential applications in economic policy and the development of analytical tools. The dialogue underscores the value of an interdisciplinary approach, integrating economic theory, dialectics, second-order cybernetics, and the capabilities of artificial intelligence. It illustrates how engaging with AI can enhance the
understanding of complex economic processes and provide fresh momentum for further research in this field.
The book is aimed at economists, AI researchers, and anyone interested in innovative directions for
the advancement of economic science
How Elon Musk's expanding footprint is shaping the future of sub-Saharan Africa
Get PDFSouth African-born tycoon Elon Musk, the world's richest person, is also a senior advisor to US President Donald Trump and head of the Department of Government Efficiency (DOGE) since 2025. His influence is growing globally, including in sub-Saharan Africa (SSA). Both Trump and Musk have their own agendas. Musk supports white Africans' claims against Pretoria for alleged land dispossession. Musk’s key projects seek to establish political and cultural hegemony in global markets. For example, ‘Starlink’, which already provides global internet access in 114 countries, including SSA, and Tesla's energy Megapack solutions. It includes solar power and energy storage projects, to support the integration of renewable energy by providing grid-scale energy storage. Musk's goals show that he is not only an economic actor but also a leader who wants to shape the future of humanity. His projects are not limited to technology and commerce, but aim to change the power dynamics in international relations. However, the services provides often seem out of reach for many Africans due to the high cost. Musk's role as 'techno-feudal lord' is unprecedented. He even acts as arbiter in wars between nations, such as the Russian invasion of Ukraine. His random swings from altruistic to narcissistic, from strategic to impulsive, have been the subject of countless publications. He apparently wants the world to be saved, but only if he can be the one to save it. His political shift to right-wing populism began with his purchase of ‘Twitter’, when he deliberately spread misinformation on the platform. Within days of his purchase, for example, thousands of anonymous accounts began bombarding feeds with racist content. Musk's involvement in AI, including 'ChatGPT', seemed to be mainly about control, credit and rivalry. It is difficult to say whether his interest is driven by scientific curiosity and altruism, or by a desire to dominate a new and potentially powerful industry. Musk's support for autocratic leaders in Turkey, India and SSA, for example, is a reminder that big tech companies, not just states, are active players in transnational repression around the world. Authoritarian regimes and tech companies share a striking similarity: an appetite for information about their populations. While Big Tech uses this data for advertising profits, authoritarian states use it to tighten their grip on their populations. Multinational corporations are not simply subservient to the state. They can become more powerful, and sometimes more dangerous, than nations or even empires
Premature deindustrialization, global value chains, and Dutch disease in Asian latecomer economies
Get PDFThis study examines premature deindustrialization in Asian latecomer developing economies and its affecting factors from the perspectives of participation in global value chains (GVC) and the Dutch Disease. We first show the degree of deindustrialization according to country-specific fixed effects in estimating the manufacturing-population-income relationships. Second, we reveal the contributions of GVC participation and the Dutch Disease effects to the country-specific fixed effect by replacing the fixed effect with these factors in the estimation. The econometric empirical estimations yielded several findings. First, the fixed-effect model estimation results suggested the existence of deindustrialization and its risk in all Asian latecomer economies, with China, Japan, and Korea as benchmark cases. Second, the factor analyses revealed that the lack of GVC participation in Asian latecomer economies contributes to their country-specific deindustrialization by around 40% on average; and as for the Dutch Disease effects, its contributions to deindustrialization is around 10% on average, although the resource-rich developing economies have relatively larger contributions to their deindustrialization
Business confidence developments and the minerals industry
Get PDFThis paper analyses the reaction of the minerals industry to business confidence developments in South Africa. This is achieved by augmenting a Taylor1993 rule type central bank monetary policy reaction function with the indicator of business confidence. The results provide evidence of a statistically significant effect of an increase in business confidence on output of the minerals industry, which peaks after 5 months, the effect of which is statistically significant up to 7 months. The results are generally consistent with the information based rational and adaptive expectation hypotheses, while they are in contrast to the herd mentality based animal spirits hypothesis. The results have further shown a statistically significant effect of an increase in output of mining and quarrying on business confidence, which initially increase and then decrease, bottoming out after 9 months, the effect of which is statistically significant between 1 and 2 months as well as between 7 and 10 months. The results support the information based expectation hypotheses, which has implications for investment, employment and expansion plans, hence policy makers and mining authorities should continue to monitor the developments in business confidence to support overall economic activity and the minerals industry
The Reformulation of OxyContin and Availability of Substance Use Treatment Facilities in the United States
Get PDFI examine how the substance use treatment sector responded to the abuse-deterrent reformulation of OxyContin, which contributed to a shift from prescription opioid misuse to heroin and synthetic opioids. First, I document a national increase in substance use treatment facilities after the reformulation and a shift toward outpatient-only care. Medication-assisted treatment with buprenorphine and naltrexone grew strongly throughout the first and second waves of the opioid crisis, while opioid treatment programs providing methadone increased relatively modestly after the reformulation. To isolate the role of exposure to OxyContin’s reformulation, I use variation in states’ pre-reformulation OxyContin misuse rates in a continuous difference-in-differences design. I find that pre-reformulation misuse rates are associated with larger increases in substance use treatment facilities after the reformulation, particularly outpatient-only facilities, with limited evidence misuse rates the availability of medication-assisted treatment services or inpatient care across states. Medicaid expansion under the Affordable Care Act was associated with more substance use treatment facilities and this effect was stronger in states with higher misuse rates, while the expansion of substance use treatment facilities was lower in states with certificate-of-need laws, highlighting the importance of insurance and regulatory barriers in treatment access. Back-of-the envelope estimates suggest the additional SUT facilities averted 2,700-7,800 overdose deaths between 2011 and 2019, corresponding to a value of $36-102 billion
Public Spending and Private Investment: Testing the Crowding-Out Hypothesis in Nigeria (1981–2020)
Get PDFThis study verified the crowding-out hypothesis in the Nigerian economy for the period 1981 to 2020. This was done in a bid to refute or otherwise the age-old claim in economic literature that government budget deficits trigger both aggregate demand and interest rates, thereby crowding out private investment. The analysis was done with the aid of the ARDL technique, given the fact that there was an admixture of stationary and nonstationary series in the model, as found out in the ADF unit root test. This study confirms the presence of the crowding-out effect in both the short run and the long run. Irrespective of the model considered, whether in the short run or long run, GDP has been a strong fundamental driver of private investment in Nigeria. Both the short-run and long-run estimates are statistically significant at the 1% level, suggesting that investment typically exceeds savings when income grows in Nigeria. In other words, private investment in Nigeria is income-driven. This result is in line with Duesenberry’s financial theory of investment. Although a positive relationship between government capital expenditure and private investment in Nigeria was confirmed in both the short run and the long run, capital expenditure is not yet a significant determinant of private investment growth. This suggests that Nigeria has not yet achieved a breakthrough in infrastructure development, particularly in critical sectors such as transportation and communication, which are essential for attracting private investment. Furthermore, the findings reiterate that most private investments in Nigeria are income-induced rather than autonomous. Consequently, the government is strongly advised to provide more incentives to indigenous manufacturers and businesses, invest heavily in infrastructure to secure Nigeria's economic future, and create a more conducive macroeconomic environment for businesses. In addition, government spending should be directed towards stimulating the productive sectors of the economy, rather than supporting consumptive activities
Linking Educational Loan Subsidies to Pay-as-you-go Pension Reforms
Get PDFThis study examines public pension reform in a small open economy model where households fully finance education. Departing from previous studies that assume fully publicly funded education, we introduce loan interest subsidies on education in the presence of intergenerational transmission of human capital, which enables an earlier phase-out of pay as-you-go (PAYG) pensions in a Pareto-improving way. We extend the analysis to a closed economy where wages and interest rates are endogenously determined. By incorporating general equilibrium effects through factor prices, we show that loan interest subsidies make a Pareto-improving, gradual reduction of PAYG pensions feasible even in closed economies. This result highlights the efficiency gains from linking pension reform with educational loan support, in contrast to prior studies that overlook private education spending or factor price adjustments
The RHOMOLO and FIDELIO interim evaluation of the impact of Horizon Europe
Get PDFThis paper presents a macroeconomic evaluation of the impact of the Horizon Europe Framework Programme for Research and Innovation, for which projects have been signed between 2021 and 1 July 2024, using the general equilibrium models RHOMOLO (Regional Holistic Model) and FIDELIO (Fully Interregional Dynamic Econometric Long-term Input-Output). The RHOMOLO model simulations suggest that the GDP gains in 2024 for the European Union would be up to 0.10% compared to GDP in 2020. The GDP gains are also expected to be significant in the medium term, with a cumulative GDP multiplier of more than 4, ten years after the end of the injection. The impact then gradually diminishes due to the obsolescence of the new knowledge and innovations generated by the policy intervention. The model results also show significant interregional spillovers in some, but not all, countries of the European Union. The FIDELIO model is used to disaggregate the impact of Horizon Europe funds on EU R&D expenditure and by sector, complementing the analysis of the RHOMOLO model. The results indicate that the positive effects on innovation gains, with business investment contributing to substantial GDP gains after the four-year intervention period, are mainly directed towards business R&D in manufacturing. Within manufacturing, the most important sub-sectors are the manufacture of machinery and equipment; computer, electronic and optical products; motor vehicles, trailers and semi-trailers; and fabricated metal products