Capitalism and Freedom

We ask whether women's decisions to be in the labor force may be affected by the decisions of other women in ways not captured by standard models. We develop a model that augments the simple neoclassical framework by introducing relative income concerns into women's (or families') utility functions. In this model, the entry of some women into paid employment can spur the entry of other women, independently of wage and income effects. This mechanism may help to explain why, over some periods, women's employment appeared to rise faster than could be accounted for by the simple neoclassical model. We test the model by asking whether women's decisions to seek paid employment depend on the employment decisions of other women with whom relative income comparisons might be important. In particular, we look at the effects of sisters' employment on women's own employment. We find strong evidence that women's employment decisions are positively related to their sisters' employment decisions. We also take account of the possibility that this positive relationship arises from heterogeneity across families in unobserved variables affecting the employment decision. We conduct numerous empirical analyses to reduce or eliminate this heterogeneity bias. We also look at the relationship between husbands' relative income and wives' employment decisions. In our view, the evidence is largely supportive of the relative income hypothesis.

Relative Income Concerns and the Rise in Married Women's Employment

Despite the relevance of nationalism for politics and intergroup relations, sociologists have devoted surprisingly little attention to the phenomenon in the United States, and historians and politi...

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Varieties of American Popular Nationalism

Rising inequality reduced income growth for the bottom 95 percent of the US personal income distribution beginning about 1980 To maintain stable debt to income, this group’s consumption-income ratio needed to decline, which did not happen through 2006, and its debt-income ratio rose dramatically, unlike the ratio for the top 5 percent In the Great Recession, the consumption-income ratio for the bottom 95 percent did finally decline, consistent with tighter borrowing constraints, while the top 5 percent ratio rose, consistent with consumption smoothing We argue that higher inequality and the associated demand drag helps explain the slow recovery

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Inequality, the Great Recession, and Slow Recovery

Empirical studies have found mixed results regarding whether various countries have wage-led or profit-led demand regimes based on a variety of econometric methodologies. However, most of the previous literature has paid too little attention to the time dimension of this distinction. This paper argues that demand is more likely to be profit led (or, at least, more weakly wage led) in the short run and more likely to be wage led (or more strongly wage led) in the long run, because the positive effects of higher profits (lower labor costs) on investment and net exports are likely to be strongest in the short run, while the positive effects of a higher wage share on consumption are if anything likely to be stronger in the long run. In fact, most of the studies that have found profit-led results (especially for the US) have used methodologies that (either intentionally or unintentionally) emphasize short-run cyclical relationships. An examination of correlations in the raw data for the US economy over different time horizons illustrates the plausibility of output and growth being profit led in the short run and wage led in the long run.

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Wage-led versus profit-led demand regimes: The long and the short of it

Part I. Introduction and Overview: 1. Understanding the great recession Barry Z. Cynamon, Steven M. Fazzari and Mark Setterfield 2. America's exhausted paradigm: macroeconomic causes of the financial crisis and great recession Thomas I. Palley Part II. Emergence of Financial Instability: 3. Minsky's money manager capitalism: assessment and reform L. Randall Wray 4. Trying to serve two masters: the dilemma of financial regulation Jan Kregel 5. How bonus-driven 'rainmaker' financial firms enrich top employees, destroy shareholder value, and create systemic financial instability James Crotty Part III. Household Spending and Debt: Source of Past Growth-Seeds of Recent Collapse: 6. The end of the consumer age Barry Z. Cynamon and Steven M. Fazzari 7. Wages, demand and US macroeconomic travails: diagnosis and prognosis Mark Setterfield Part IV. Global Dimensions of US Crisis: 8. Global imbalances and US trade in the great recession and its aftermath Robert Blecker Part V. Economic Policy after the Great Recession: 9. Confronting the Kindleberger moment: credit, fiscal, and regulatory policy to avoid economic disaster Gerald Epstein 10. Fiscal policy: the recent record and lessons for the future Dean Baker 11. No need to panic about US government deficits Barry Z. Cynamon and Steven M. Fazzari 12. Fiscal policy for the great recession and beyond Pavlina Tcherneva Part VI. The Way Forward: 13. Demand, finance, and uncertainty beyond the great recession Barry Z. Cynamon, Steven M. Fazzari and Mark Setterfield.

Robert Kuttner

Papers

After the Great Recession: The Struggle for Economic Recovery and Growth

After the Great Recession: Global Dimensions of U.S. Crisis