Levy Institute Publications

  • An Alternative to Sovereign Bond-Backed Securities for the Euro Area


    One-Pager No. 56 | June 2018 | Mario Tonveronachi
    The European Commission's proposal for the regulation of sovereign bond-backed securities (SBBSs) follows the release of a high-level taskforce report, sponsored by the European Systemic Risk Board, on the feasibility of an SBBS framework. The proposal and the SBBS scheme, Mario Tonveronachi argues, would fail to yield the intended results while undermining financial stability.

    Tonveronachi articulates his alternative, centered on the European Central Bank's issuance of debt certificates along the maturity spectrum to create a common yield curve and corresponding absorption of a share of each eurozone country’s national debts. Alongside these financial operations, new reflationary but debt-reducing fiscal rules would be imposed.

  • “America First,” Fiscal Policy, and Financial Stability


    Strategic Analysis, April 2018 | April 2018 | Michalis Nikiforos, Gennaro Zezza
    The US economy has been expanding continuously for almost nine years, making the current recovery the second longest in postwar history. However, the current recovery is also the slowest recovery of the postwar period.

    This Strategic Analysis presents the medium-run prospects, challenges, and contradictions for the US economy using the Levy Institute’s stock-flow consistent macroeconometric model. By comparing a baseline projection for 2018–21 in which no budget or tax changes take place to three additional scenarios, the authors isolate the likely macroeconomic impacts of: (1) the recently passed tax bill; (2) a large-scale public infrastructure plan of the same “fiscal size” as the tax cuts; and (3) the spending increases entailed by the Bipartisan Budget Act and omnibus bill. Finally, Nikiforos and Zezza update their estimates of the likely outcome of a scenario in which there is a sharp drop in the stock market that induces another round of private-sector deleveraging.

    Although in the near term the US economy could see an acceleration of its GDP growth rate due to the recently approved increase in federal spending and the new tax law, it is increasingly likely that the recovery will be derailed by a crisis that will originate in the financial sector.
     

  • The Trump Effect: Is This Time Different?


    Strategic Analysis, April 2017 | April 2017 | Michalis Nikiforos, Gennaro Zezza
    From a macroeconomic point of view, 2016 was an ordinary year in the post–Great Recession period. As in prior years, the conventional forecasts predicted that this would be the year the economy would finally escape from the “new normal” of secular stagnation. But just as in every previous year, the forecasts were confounded by the actual result: lower-than-expected growth—just 1.6 percent.
     
    The radical policy changes promoted by the new Trump administration dominated economic conditions in the closing quarter of the year and the first quarter of 2017. Markets have responded with exuberance since the November elections, on the expectation that the proposed policy measures would increase profitability by boosting growth and cutting personal and corporate taxes. However, an evaluation of the US economy’s structural characteristics reveals three key impediments to a robust, sustainable recovery: income inequality, fiscal conservatism, and weak net export demand. The new administration’s often conflicting policy proposals are unlikely to solve any of these fundamental problems—if anything, the situation will worsen.
     
    Our latest Strategic Analysis provides two medium-term scenarios for the US economy. The “business as usual” baseline scenario (built on CBO estimates) shows household debt and GDP growth roughly maintaining their moribund postcrisis trends. The second scenario assumes a sharp correction in the stock market beginning in 2017Q3, combined with another round of private sector deleveraging. The results: negative growth and a government deficit of 8.3 percent by 2020—essentially a repeat of the crisis of 2007–9. 

  • The Measurement of Time and Consumption Poverty in Ghana and Tanzania


    Research Project Reports, August 2018 | August 2018 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila, Kijong Kim, Tamar Khitarishvili
    The Levy Institute Measure of Time and Consumption Poverty
    Time constraints that stem from the overlapping domains of paid and unpaid work are of central concern to the debates surrounding the economic development of developing countries in general and countries of sub-Saharan Africa in particular. Time deficits due to household production are especially acute in these countries due to the poor state of social and physical infrastructure, which constrains the time allocation people can choose.

    Standard measures of poverty fail to capture hardships caused by time deficits. This report applies a methodological approach that incorporates time deficits into the measurement of poverty, known as the Levy Institute Measure of Time and Consumption Poverty (LIMTCP), to the cases of Ghana and Tanzania. The LIMTCP explicitly recognizes the role of time constraints and, as such, has the potential to meaningfully inform the design of policies aimed at poverty reduction and improvement of individual and household well-being. The analysis of simulation exercises assessing the impact of paid employment provision on official and LIMTCP poverty rates has strong implications for policies aimed at poverty reduction, emphasizing the need to account for alleviating not only income but also time constraints. It also has strong gender relevance, as time poverty is more relevant for women due to their disproportionate burden of household responsibilities. Our study argues that policies aimed at improving women’s labor market outcomes can also succeed at improving their well-being only if time constraints are addressed.

  • Public Service Employment: A Path to Full Employment


    Research Project Reports, April 2018 | April 2018 | L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton
    Despite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.
     
    The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.
     
    Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.

  • The Macroeconomic Effects of Student Debt Cancellation


    Research Project Report, February 2018 | February 2018 | Scott Fullwiler, Stephanie A. Kelton, Catherine Ruetschlin, Marshall Steinbaum
    Among the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.

    The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.

    The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.
     

  • Stagnating Economic Well-Being and Unrelenting Inequality


    Public Policy Brief No. 146, 2018 | August 2018 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila
    Post-2000 Trends in the United States
    Ajit Zacharias, Thomas Masterson, and Fernando Rios-Avila update the Levy Institute Measure of Economic Well-Being (LIMEW) for US households for the period 2000–13. The LIMEW—which comprises base income, income from wealth, net government expenditures, and the value of household production—is aimed at achieving a more comprehensive understanding of trends in living standards. This policy brief analyzes developments during this period at all levels of the LIMEW distribution, with a particular focus on the significant role played by net government expenditures. The overall trend for 2000–13 was one of historic stagnation in the growth of economic well-being for US households, but an examination of the different components of the measure reveals significant shifts taking place behind this headline trend.
     
    A companion document, the Supplemental Tables, features additional data referenced in the policy brief.

    Details about the sources of data and methods used to construct the estimates in this policy brief are discussed in Levy Institute Working Paper No. 912.

  • European Sovereign Bond-Backed Securities


    Public Policy Brief No. 145, 2018 | June 2018 | Mario Tonveronachi
    An Assessment and an Alternative Proposal
    In response to a proposal put forward by the European Commission for the regulation of sovereign bond-backed securities (SBBSs), Mario Tonveronachi provides his analysis of the SBBS scheme and attendant regulatory proposal, and elaborates on an alternative approach to addressing the problems that have motivated this high-level consideration of an SBBS framework.

    As this policy brief explains, it is doubtful the SBBS proposal would produce its intended results. Tonveronachi’s alternative, discussed in Levy Institute Public Policy Briefs Nos. 137 and 140, not only better addresses the two problems targeted by the SBBS scheme, but also a third, critical defect of the current euro system: national sovereign debt sustainability.

  • Wage Employment and the Prospects of Women’s Economic Empowerment


    Policy Note 2018/4 | May 2018 | Thomas Masterson, Ajit Zacharias
    Some Lessons from Ghana and Tanzania
    In this policy note, Thomas Masterson and Ajit Zacharias address the nexus between wage employment, consumption poverty, and time deficits in the context of Ghana and Tanzania. Based on a recently completed research project supported by the Hewlett Foundation, the authors apply the Levy Institute Measure of Time and Consumption Poverty (LIMTCP) to estimate whether the jobs that are likely to be available to potential employment-seeking, working-age individuals in consumption-poor households—who are predominantly female in both countries—can serve as vehicles of “economic empowerment.” They investigate this question using two indicators of empowerment, asking (1) whether the individual would be able to move their household to at least a minimal level of consumption via the additional earnings from their new job and (2) whether the individual would be deprived of the time required to meet the minimal needs of care for themselves (personal care), their homes, and their dependents.

  • A Consensus Strategy for a Universal Job Guarantee Program


    Policy Note 2018/3 | May 2018 | L. Randall Wray
    The idea of a universal job guarantee (JG) policy for the United States has become the subject of renewed public debate due to a number of high-profile political endorsements. L. Randall Wray recently coauthored a report that presented a JG proposal—the Public Service Employment program—along with estimates of the economic impact of the plan. However, several other variants have been proposed and/or endorsed. In this policy note, Wray seeks to establish common ground among the major JG plans and provides an initial response to critics.

  • Stagnating Economic Well-Being Amid Rising Government Support


    One-Pager No. 57 | September 2018 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila
    The Levy Institute Measure of Economic Well-Being (LIMEW) was designed to provide a more comprehensive understanding of the changes affecting household living standards. Ajit Zacharias, Thomas Masterson, and Fernando Rios-Avila summarize their latest research on the trends in economic well-being for US households. They reveal historic stagnation in LIMEW growth over the 2000–13 period, as well as a major shift in the composition of well-being. The post-2000 period can be characterized as one of a growing dependence on the government to sustain living standards, with rising net government expenditures offsetting a sharp drop in base income.

  • Black Employment Trends since the Great Recession


    Working Paper No. 915 | September 2018 | Thomas Masterson
    The Great Recession had a devastating impact on labor force participation and employment. This impact was not unlike other recessions, except in size. The recovery, however, has been unusual not so much for its sluggishness but for the unusual pattern of recovery in employment by race. The black employment–population ratio has increased since bottoming out in 2010, while the white employment–population ratio has remained flat. This paper examines trends in labor force participation and employment by race, sex, and age and determines that the explanation is a combination of an aging white population and an increase in labor force participation among younger black people. It estimates the likelihood of labor force participation and employment among young men and women to control for confounding factors (such as changes in educational characteristics) and decomposes the gaps among groups and the changes over time in labor force participation using a Oaxaca-Blinder-like technique for nonlinear estimations. Findings indicate that much smaller negative impacts of characteristics and greater returns to characteristics among young black men and women than among young white men and women explain the observed trends.

  • Quality of Match for Statistical Matches Using the American Time Use Survey 2013, the Survey of Consumer Finances 2013, and the Annual Social and Economic Supplement 2014


    Working Paper No. 914 | September 2018 | Fernando Rios-Avila
    This paper describes the quality of the statistical matching between the March 2014 supplement to the Current Population Survey (CPS) and the 2013 American Time Use Survey (ATUS) and Survey of Consumer Finances (SCF), which are used as the basis for the 2013 Levy Institute Measure of Economic Well-Being (LIMEW) estimates for the United States. In the first part of the paper, the alignment of the datasets is examined. In the second, various aspects of the match quality are described. The results indicate that the matches are of high quality, with some indication of bias in specific cases.

  • Classical Economics Today: Essays in Honor of Alessandro Roncaglia


    Book Series, March 2018 | March 2018 | Jan Kregel
    Edited by Marcella Corsi, Jan Kregel, and Carlo D'Ippoliti
    Edited by Marcella Corsi, Sapienza University of Rome, Levy Institute Director of Research Jan Kregel, and Carlo D’Ippoliti, Sapienza University of Rome, this new collection of 16 essays is dedicated to Alessandro Roncaglia and deals with the themes that “have characterized his work or represent expressions of his personality, his interests and method," particularly his contributions to the interpretation of classical political economists as a means for informing present-day policy.

    Published by: Anthem Press
  • America Classifies the Immigrants


    Book Series, April 2018 | April 2018 | Joel Perlmann
    From Ellis Island to the 2020 Census
    In America Classifies the Immigrants: From Ellis Island to the 2020 Census (Harvard University Press, 2018), Senior Scholar Joel Perlmann traces the evolution of thinking about “race” and “ethnic groups” in America. Beginning with the 1897 “List of Races and Peoples” through the proposed 2020 changes for the US Census, Perlmann examines the shifting ideas about racial and national differences that shape our social and legal policies.

    Published by: Harvard University Press
  • Summary Fall 2018


    Volume 27, No. 3 | September 2018 | Elizabeth Dunn, Michael Stephens
    This issue of the Summary features a public policy brief discussing the European Commission’s proposal for regulating sovereign bond-backed securities (SBBS) and presents an alternative approach to addressing the problems that are supposed to be solved by an SBBS scheme. Three policy notes also are included. The first focuses on the nexus between wage employment, consumption poverty, and time deficits, particularly as they affect women’s economic empowerment, while the other two consider the impacts of a federally funded and locally administered Public Service Employment (PSE) program. A research project report provides details on the full scope of the PSE proposal.
     
    Working papers included in this issue present a critical discussion of the Sraffian supermultiplier approach to growth and distribution; analyze the macroeconomic implications of corporate debt in Latin America; consider the costs of the failure of state-managed intervention in financial markets and the increase in moral hazard in the period following the fall of the Berlin Wall; investigate the dynamics of bond yields in Japan; employ a historic perspective to evaluate how supposedly stable and efficient markets embark on disequilibrium paths; examine the impetus behind the increase in household debt relative to consumption; evaluate popular New Deal–era programs through the lens of the evolving definition of “liberal democracy”; and suggest a blueprint for implementing a job guarantee program, with an appendix addressing a list of frequently asked questions about the costs and benefits of such a program.
     
    INSTITUTE RESEARCH

    Program: The State of the US and World Economies
     
    • MICHALIS NIKIFOROS, Some Comments on the Sraffian Supermultiplier Approach to Growth and Distribution
    • ESTEBAN PÉREZ CALDENTEY, NICOLE FAVREAU-NEGRONT, and LUIS MÉNDEZ LOBOS, Corporate Debt in Latin America and Its Macroeconomic Implications
     
    Program: Monetary Policy and Financial Structure
     
    • MARIO TONVERONACHI, European Sovereign Bond-Backed Securities: An Assessment and an Alternative Proposal
    • W. LEE HOSKINS and WALKER F. TODD, Twenty Years after the Fall of the Berlin Wall: Rethinking the Role of Money and Markets in the Global Economy
    • TANWEER AKRAM and HUIQING LI, The Dynamics of Japanese Government Bonds’ Nominal Yields
    • FRANK VENEROSO, The Economics of Instability: An Abstract of an Excerpt

    Program: The Distribution of Income and Wealth
     
    • THOMAS MASTERSON and AJIT ZACHARIAS, Wage Employment and the Prospects of Women’s Economic Empowerment: Some Lessons from Ghana and Tanzania
    • J. W. MASON, Income Distribution, Household Debt, and Aggregate Demand: A Critical Assessment
     
    Program: Employment Policy and Labor Markets
     
    • L. RANDALL WRAY, FLAVIA DANTAS, SCOTT FULLWILER, PAVLINA R. TCHERNEVA, and STEPHANIE A. KELTON, Public Service Employment: A Path to Full Employment
    • L. RANDALL WRAY, A Consensus Strategy for a Universal Job Guarantee Program
    • L. RANDALL WRAY, FLAVIA DANTAS, SCOTT FULLWILER, PAVLINA R. TCHERNEVA, and STEPHANIE A. KELTON, Guaranteed Jobs through a Public Service Employment Program
    • JOHN F. HENRY, Reflections on the New Deal: The Vested Interests, Limits to Reform, and the Meaning of Liberal Democracy
    • PAVLINA R. TCHERNEVA, The Job Guarantee: Design, Jobs, and Implementation
     
    INSTITUTE NEWS
     
    • Fernando Cardim de Carvalho
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    Author(s):
    Elizabeth Dunn Michael Stephens

Ford-Levy Institute Projects
 
Levy Institute Publications in Greek

From the Press Room

The Levy Institute announces the passing of Senior Scholar Fernando Cardim de Carvalho

The Levy Institute announces the passing of Senior Scholar Fernando Cardim de Carvalho


Rania Antonopoulou, former Alternate Minister of Labor of Greece, shares her "own truth."

Rania Antonopoulou, former Alternate Minister of Labor of Greece, shares her "own truth."


The Rock-Star Appeal of Modern Monetary Theory

The Rock-Star Appeal of Modern Monetary Theory

The Sanders generation and a new economic idea
Minsky's Moment

Minsky's Moment

The second in a series of articles on seminal economic ideas looks at Hyman Minsky’s hypothesis that booms sow the seeds of busts.