I discussed on several occasions before the worsening of income distribution and the squeeze of the labor share in total income. Figure below provides updated information.
Professor Autor and some of his co-authors suggest this in part might result from the rise of the 'superstar firm.' In other words, Facebook, Google (Alphabet), Amazon, Apple, etc and the winner take all economy. This paper (h/t Santiago Capraro) argues that this results from market power reflected in higher mark ups.
Note that the paper by Autor et. al. suggests that superstar firms are more efficient and as their share of the market increase, their higher productivity and reduced labor force leads to a lower share for labor in the aggregate. It is mostly a technological effect for them.
I have my doubts, of course, about any story that leaves out the relative bargaining power of the labor force, and in this story the regulatory environment that has allowed the information age firms to have such large shares of the market. But that's another story.
Note that the paper by Autor et. al. suggests that superstar firms are more efficient and as their share of the market increase, their higher productivity and reduced labor force leads to a lower share for labor in the aggregate. It is mostly a technological effect for them.
I have my doubts, of course, about any story that leaves out the relative bargaining power of the labor force, and in this story the regulatory environment that has allowed the information age firms to have such large shares of the market. But that's another story.
Mr Vernengo, I was very pleased to discover your blog recently, in particular because there are not many people writing about Argentina from a Left or Keynesian perspective, much less an Argentine one.
ReplyDeleteHowever I do have a question which I hope your blog can cover. You wrote in 2015 about why a devaluation and a fiscal adjustment would be bad for Argentina. However I do not see how else a correction of some kind was not in order, of the sort that Macri did - not what Macri did but many of his policies.
What would have been your proposed solution in the Argentine economic context of 2012-2015 to lower inflation and resume economic growth?
I want to clarify I do NOT support Macri, and I think his adjustment policies are NOT really about reordering the economy, but ensuring that once again all economic gains and more flow to the top of the income distribution combined with an aggressive antipathy to the poor in Argentina, and even Argentinian industry.
Hi Meade556. Argentina did have in 2015 an external constraint. The problem with depreciation is that it really solves it by promoting contraction, which was worsened by Macri's fiscal contraction. There was no simple solution. I always thought that a solution for the Vulture's problem and some international borrowing was required, but certainly not under the terms Macri obtained. That would ease the balance of payments constraint, and allow for the economy to continue to grow at a modicum pace, without leading it into a recession. Further, you needed a long term strategy of import substitution, to reduce the long term need of external finance, and a State-led industrial policy to promote exports, and export diversification. That is, to promote a more sophisticated integration into the world economy. Mind you, the Brazilian collapse would have made all of this more difficult, since Brazil is one of the main trading partners of Argentina. And obviously all of these is easier said than done. But with all their problems the Kirchners were at least aware of these points. Macri's intention is to bring back the old type of global integration associated to commodity exports. That's not a reasonable development strategy.
ReplyDeleteMr Vernengo,
DeleteThank you for your response. I know depreciation is inflationary, but how is it contractionary, provided of course the rate of depreciation exceeds the rate of inflation does it not make exports more competitive and Argentine produced goods more competitive in the domestic market?
Second I cannot and will not defend what Macri did with the so called Vulture Funds. Griesa's ruling was a travesty of justice and so utterly politically motivated as to make a complete mockery of the idea of an independent judiciary.
However, one very slight agreement I have with Macri is that export duties on agricultural goods were too high. He wants them to be zero, and obviously I think they should be above 0. But as part of an adjustment programme, would it not have been good to cut the export duties to encourage more agricultural exports to earn more revenue for the government that could have been used to reduce the deficit. At the same time instead of outright cutting food and fuel subsidies, Would it not have been better to freeze the total money amount (so people did not lose money income) and spend the money instead on infrastructure which would have made Argentine industrial products made in, say, Tierra Del Fuego more competitive by reducing input and transportation costs, combined with a devaluation?
Sorry if this seems obsessive but one thing I have found deeply upsetting is the unbridled love the international press has for Macri, and the execration they have for the Kirchners despite everything the Kirchners and the Front for Victory achieved.
So what would have been your exact policy preferences to make the adjustment in 2016 and why do you think the press ignores/ sneers at the obvious success of the Kirchner's?
The export tax was simply an instrument of exchange rate policy, that also generated revenue, and was by no means high. The windfall for exporters and soybean speculators was huge. And regarding the media, and not just the media (note that Obama went and visited Macri right after the election to provide support; so 'liberals' in the North too), it is simply part of class conflict. Corporate media favors corporate interests.
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