‘Does inequality hamper innovation and growth?’ by Alberto Russo (Marche Polytechnic University)

Abstract: The paper builds upon the Agent Based-Stock Flow Consistent model presented in Caiani et al. (2015) to analyze the relationship between income and wealth inequality and economic development. For this sake, the original model has been amended under three main dimensions: first, the households sector has been subdivided into workmen, office workers, researchers, and executives which compete on segmented labor markets.  Conversely, firms are now characterized by a hierarchical organization structure which determines, according to firms’ output levels, their demand for each type of workers. Second, in order to account for the impact of income and wealth distribution on consumption patterns, different households classes – also representing different income groups – have diversified average propensities to consume and save. Finally, the model now embeds technological change in an evolutionary flavor, affecting labor productivity evolution in the consumption sector through product innovation in the capital sector, where firms invest in R&D and produce differentiated vintages of machineries. The model is then calibrated using realistic values for both income and wealth distribution across different income groups, and their average propensities to consume. Results of the simulation experiments suggest that more progressive tax schemes and labor market policies aiming to increase low and middle workers’ coordination, and to support their wage levels, concur to foster economic development and to reduce inequality, though the latter seem to be more effective under both respects. The model thus provides some evidence in favor of a wage-led growth regime, where improvements of middle-low levels workers’ conditions create positive systemic effects, which eventually trickle up also to high income-profit earners households.

‘A simple formalisation of Minsky’s business cycle theory’ by Rob Jump (Kingston University)

Abstract: This paper presents a simple model of Minsky’s business cycle theory. The model is based on the Phillips (1954) continuous time multiplier accelerator model, where firms have a target debt to income ratio, rather than a target capital to income ratio. Via a strategy switching mechanism, fluctuations with a smaller perceived volatility lead to firms reducing their margins of safety by moving towards higher debt to income ratios. This increases volatility, the economy is destabilised, and firms increase their margins of safety by moving towards lower debt to income ratios. Hence the cycle repeats itself, and “stability is destabilising”.  The simple model relies on an approximate aggregation assumption, and we estimate the approximation bias numerically using techniques from agent based modelling.

Please join us for this event as part of the Economic Department Research Seminar Series, it is free to attend.

Booking and further information: http://www.kingston.ac.uk/events/item/2502/22-mar-2017-economics-research-seminar-with-alberto-russo-and-rob-jump/

Contact: Antoine Godin (A.Godin@kingston.ac.uk)

Venue: JG 3013

How to find us: The seminar takes place at Penryhn Road Campus (Kingston upon Thames, Surrey, KT1 2EE). Public Transport: take train from London Waterloo to Surbiton (20 mins approx.) and walk (15 mins approx.) or buses 71, 281, K2, K3 (5 mins approx.) from Surbiton Station to Kingston University. For further details and driving directions, please go http://www.kingston.ac.uk/aboutkingstonuniversity/location/howtofindus/penrhynroad/