Political Economy Research Group (PERG)

Collin Constantine gained his PhD in economics at Kingston University in 2020. He works on economic development and growth, international economics, inequality, political economy, public economics, open economy macroeconomics and Caribbean economic history. After obtaining his PhD, he obtained a post as College Lecturer and Official Fellow of Economics at Girton College, University of Cambridge. He is the coordinator of INET's Young Scholars Initiative's Economic Development working group and a member of PERG.

Tim Gooding gained his PhD from Kingston University, in which he investigated the foundational emergent behaviour of trade. Key experimental findings include a baseline exponential inequality of the distribution of money (0.5 Gini coefficient), an inverse relationship between required agent computation (such as consumer choice) and system efficiency, and strong evidence suggesting long-term prices in closed economic trade systems (such as the global economy) are not linked to supply and demand. Additional interests include evolutionary forces shaping human society, especially in the form of evolutionary fitness tests.

Karsten Köhler gained his PhD in economics at Kingston University in 2019. He is now a lecturer at King's College. His PhD dissertation was on boom-bust cycles and exchange rate policy in emerging market economies. Further research interests include open economy macroeconomics, financial and business cycles in advanced and emerging market economies, and the effect of financialisation on income distribution. Recent publications: Kohler, Karsten (2017) 'Currency devaluations, aggregate demand, and debt dynamics in economies with foreign currency liabilities', Journal of Post Keynesian Economics, 40(4), 487-511.

Christian Koutny is a PhD student in economics and part of PERG at Kingston University. He received a BSc in economics from the WU Vienna and a MA in Political Economy from Kingston University, for which he received a scholarship from the Chamber of Labour Vienna. At the moment he receives the Kingston University Research Studentship and examines financial (Minskian) effects on the real economy (investment, business cycle). He is also a member of the Foundation for European Progressive Studies (FEPS) Young Academics Network (YAN), where he is working on the economic aspects of the European Pillar of Social Rights.

Bazil Sansom is an economist, policy analyst and strategist. He obtained he PhD in Economics in 2020. His doctoral research has focused on characterising and explaining housing market dynamics, and the macro/housing/finance nexus. Previously he has led work for government on local public services and finance, housing, and on strategy, business planning and change management; he has also taken the analytical lead for asset portfolios in a variety of different industries as a research and credit analyst for commercial banking. His research interests include non-stationary time series analysis, wavelets based time-frequency methods, graph theory, empirical and analytical methods in nonlinear dynamics, and complex systems. Other academic specialisations and interests include behavioural economics and experimental methodologies and their application for policy.

Rafael Wildauer received his PhD from Kingston in 2017, and is now working at the University of Greenwich. His research interests are the determinants of household debt, particularly the role played by personal income inequality and the evolution of income and wealth inequality over time in general. Before coming to Kingston, Rafael gained research experience during an internship at the Macroeconomic Policy Institute in Düsseldorf, Germany, contributing to a meta-analysis of fiscal multipliers among other projects. He also worked as a research assistant at the University of Linz on statistical correction of the sample bias in wealth survey data.

Dr Rex McKenzie

Project outline

This project investigates offshore wealth investment and its effects on wealth distribution and urban life in UK cities. It is an interdisciplinary project that includes, political economists, urban sociologists, cultural political economists, econometricians, complex systems specialists and civil society activists. The project is the result of a competitive bidding process and is a Trust for London funded research project that combines open ended, semi-structured interviews with HM Land Registry data on foreign ownership and a unique empty homes data set to gain a greater understanding of the relationship between property investment coming from offshore tax havens and socio-economic inequality in London.

Research outputs

The first research output was published in 2020 in Urban Studies:

• McKenzie, Rex and Atkinson, Rowland (2020) Anchoring capital in place : the grounded impact of international wealth chains on housing markets in London. Urban Studies, 57(1), pp. 21-38

Dr Simon Choat and Dr Christina Wolf

Project outline

This project has received faculty funding and investigates the degree to which UK higher education curricula in politics and economics are dominated by white, male thinkers and omit issues of race, class, gender and colonialism. The project introduces a comparative perspective, linking up economics and politics research on the topic of diversification of curricula. It is structured around three main research questions:

1. To what extent do UK undergraduate politics and economics programmes include women, non-white or non-Western thinkers and engage with issues of colonialism, race and gender?
2. What are the causal factors that perpetuate unbalanced colonialised curricula and to what extent do these have common roots in both politics and economics?
3. What are the effects of such unbalanced curricula on students, especially in courses with a high share of BAME students such as Kingston.

Professor Engelbert Stockhammer
Funded by the Institute of New Economic Thinking

The financial crisis that began in summer 2007 has since turned into the worst economic crisis since the Great Depression. Its causes are usually sought in the malfunctioning of the financial sector leading to a real estate bubble and rapidly rising household debt. Among the macroeconomic factors that have attracted attention international imbalances have featured prominently: capital inflows, in particular from Asian countries that wanted to accumulate reserves, provided ample liquidity for this process. While all these financial mechanisms are indeed important, this project argues that they may only give half the picture. The project will investigate the hypothesis that rising inequality has contributed to the macroeconomic imbalances that erupted in the present crisis.

This project, financed by the Institute for New Economic Thinking, proposes to interpret the present crisis as an outcome of the interaction of the effects of financialisation with the effects of rising inequality. We thus do not deny the importance of financial factors, but argue that they have to be seen in conjunction with increasing inequality. A dramatic shift in income distribution in all OECD economies has been one of the major socio-economic changes since the early 1980s. This has taken different forms in different countries. In the Anglo-Saxon countries a polarisation of personal income distribution has occurred. In the continental European countries, it is functional rather than personal income distribution that has shifted dramatically. These changes in income distribution are historically extraordinary. They mark a clear break with the relatively egalitarian income distribution of post-war capitalism. In the USA income inequality is at its most extreme for a century! Given these dramatic changes one would expect macroeconomic effects.

Project outline

The project furthers our understanding of how rising inequality has contributed to the macroeconomic imbalances that erupted in the present crisis. This is done based on a Kaleckian macroeconomic model. We suggest that the present crisis should be understood as an outcome of the interaction of the process of financialisation with the effects of the polarisation of income distribution. The project will explore three channels through which rising inequality has contributed to the crisis.

• Channel 1: The decline in the wage share has a negative effect on domestic demand and has thus contributed to stagnation tendencies.
• Channel 2: The deregulation of international capital flows has loosened the balance of payments constraints for individual countries and has thus allowed the emergence of two growth models: one group of countries has relied on debt-led consumption growth-typically implying capital inflows; another group has relied on net exports growth, which implies capital outflows.
• Channel 3: Rising inequality, in particular stagnant wage growth, has contributed to rising household indebtedness in the USA.

Outputs

• Stockhammer, E, Wildauer, R, (2016) Debt-driven growth? Wealth, distribution and demand in OECD countries. Cambridge Journal of Economics: 40(6):1609-1634 http://doi: 10.1093/cje/bev070
• Stockhammer, E, Durand, C, List, L, (2016) European growth models and working class restructuring before the crisis. An International post-Keynesian Political Economy Approach, Environment and Planning A 48(9) 1804-1828
• Stockhammer, Engelbert & Wildauer, Rafael, (2017) "Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries,"Economics Discussion Papers 2017-3, School of Economics, Kingston University London.
• Wildauer, R, (2016), "Determinants of US household debt: New evidence from the SCF,"Post Keynesian Economics Study Group (PKSG) Working Paper PKWP1608,
• Guschanski, A, Stockhammer, E (2017) Are current accounts driven by competitiveness or asset prices? A synthetic model and an empirical test Post Keynesian Economics Study Group Working paper PKWP1716

Project commissioned by the International Labour Office (ILO).

The wage-led growth strategy aims at an economic regime where real wage growth leads to increased demand and technological progress and thereby provides the foundation for a sustainable growth process. But what determines wage growth or changes in income distribution in the first place? What have been the causes for the shift of income distribution at the expense of labour in advanced economies in the past three decades? How can wage growth be restored? These are the questions that motivate this project. The project reports form the background for a substantial part of the ILO's Global Wage Report 2012/13.

• Lavoie and Stockhammer (2012) argue that the polarisation of income distribution and the decline in the wage share play an important role in the generation of unbalanced and fragile growth in the neoliberal era. The authors examine the possibility of a wage-led growth strategy, which is likely to generate a much more stable growth regime for the future.
• Stockhammer (2013) investigates the relative impact of financialisation, globalisation, welfare state retrenchment and technological change on functional income distribution. By means of a panel analysis covering up to 71 countries from 1970 to 2007, he finds strong negative effects of financialisation as well as negative effects of welfare state retrenchment and globalisation, but only a small contribution of technological change.
• Onaran and Galanis (2012) estimate the effects of a change in the wage share on growth in the G20 countries using a post-Keynesian/post-Kaleckian model, analyse the interactions among different economies, and calculate the global multiplier effects of a simultaneous decline in the wage share.
• Storm and Naastepad (2012) argue that higher real wages provide macroeconomic benefits in terms of increased demand (if the economy is wage-led) and higher labour productivity growth and more rapid technological progress.
• Van Treeck and Sturn (2012) investigate the macroeconomic effects of increasing personal income inequality in the USA, Germany and China. They argue that reducing inequality in these countries is crucial for overcoming macroeconomic instability and the global and European current account imbalances over the longer term.
• Hein and Mundt (2012) argue that the severity of the present crisis has to be understood by examining the medium- to long-run developments since the early 1980s: inefficient regulation of financial markets, increasing inequality in the distribution of income and rising imbalances at the global level. The requirements for distribution policies within an expansionary post-crisis economic policy regime, a wage-led growth regime embedded in a Global Keynesian New Deal, are outlined.
• Lavoie, M, Stockhammer, E. (2012), Wage-led growth: Concept, theories and policies, ILO Working Papers, Conditions of Work and Employment Series No. 41
• Stockhammer, E. (2013), Why have wage shares fallen? A panel analysis of the determinants of functional income distribution. ILO Working Paper, Conditions of Work and Employment Series No. 35
• Stockhammer, E (2017) Determinants of the wage share. A panel analysis of advanced and developing economies. British Journal of Industrial Relations 55, 1: 3-33
• Onaran, O. and Galanis, G. (2012). Is aggregate demand wage-led or profit-led? National and global effects, ILO Working Papers, Conditions of Work and Employment Series No. 40, Geneva.
• Storm S. and C. W. M. Nastepaad, (2012), Wage-led or Profit-led Supply: Wages, Productivity and Investment, ILO Working Papers Conditions of Work and Employment Series No. 36
• Van Treeck, T., Sturn, S. (2012). Income inequality as a cause of the Great Recession? A survey of current debates, Conditions of Work and Employment Series No. 39
• Hein, E. Mundt, M. (2012). Financialisation and the requirements and potentials for wage-led recovery - a review focussing on the G20. ILO Working Papers, Conditions of Work and Employment Series No. 37, Geneva.

Professor Engelbert Stockhammer
Project for the International Labour Organisation (ILO)

The wage-led growth strategy aims at an economic regime where real wage growth leads to increased demand and technological progress and thereby provides the foundation for a sustainable growth process. But what determines wage growth or changes in income distribution in the first place? What have been the causes for the shift of income distribution at the expense of labour in advanced economies in the past three decades? How can wage growth be restored? These are the questions that motivate this project.

Recent decades have witnessed profound changes in income distribution, with trends being somewhat clearer in advanced economies than in developing countries. There has been a pronounced rise in personal income distribution (OECD 2008); there has been a dramatic rise in top incomes relative to other incomes (in particular in Anglo-Saxon countries; Atkinson et al 2010); and there has been substantial decline in wage shares (particularly in continental Europe and Japan); distributional trends in developing economies are less well documented, but a polarisation of income distribution has also taken place.

These changes have given rise to recent literature exploring the causes of these changes, which has highlighted technological change, globalisation, financialisation, and other institutional changes as potential causes. Recent research on the determinants of income distribution is driven by real-world developments rather than theoretical developments.

Research outline

The project aims at identifying the relative contributions of technological change, globalisation and financialisation in explaining changes in functional income distribution in the G20 countries econometrically. It will critically build on the existing literature, in particular on IMF (2007a), IMF (2007b), and EC (2007), and estimate a panel equation where the wage is explained by indicators of technology (e.g. ICT capital stock), globalisation (e.g. trade openness), financialization (e.g. the financial globalization as measure by the stock of foreign liabilities and assets; Lane and Milesi-Ferretti 2006). Given that some theories suggest that the factors will have opposite distributional effects in advanced (capital-rich) and poor (capital-poor) economies, particular attention will be paid to the issue of coefficient heterogeneity.

The project will provide further investigation on the determination of functional income distribution in developed economies, for which more data are available, building on Stockhammer (2009). Here the role of labour market institutions that have played a role in the discussion of unemployment; will be investigated. This is of interest as standard NAIRU models predict that those labour market institutions that affect long-term unemployment also affect the wage share (e.g. EC 2007).

Research output

• Stockhammer, E. (2013) investigates the relative impact of financialisation, globalisation, welfare state retrenchment and technological change on functional income distribution. By means of a panel analysis covering up to 71 countries from 1970 to 2007, he found strong negative effects of financialisation as well as negative effects of welfare state retrenchment and globalisation, but only a small contribution of technological change.
• Stockhammer, E. (2013), Why have wage shares fallen? A panel analysis of the determinants of functional income distribution. ILO Working Paper, Conditions of Work and Employment Series No. 35
• Stockhammer, E. (2017) Determinants of the wage share. A panel analysis of advanced and developing economies. British Journal of Industrial Relations 55, 1: 3-33

Professor Engelbert Stockhammer
Project for the Chamber of Labour, Vienna, Austria

The financial crisis that began in summer 2007 has since turned into the worst economic crisis since the Great Depression. Its immediate causes are to be found in the malfunctioning of the financial sector: securitisation of mortgages allowed for a fast growth of credit and lowered credit standards as banks believed they had passed on credit risk; this fuelled a property bubble; statistical models, that turned out to be based on short time samples, were promised to reduce risk by constructing ingenious portfolios; well-paid rating agencies decorated the new assets with triple A ratings; banks shifted credit off balance sheets into structured investment vehicles; finally, capital inflows from Asian countries that wanted to accumulate reserves provided ample liquidity for this process. Obviously the financial system needs to be fundamentally overhauled. While these mechanisms were indeed important, this paper argues, they are only half of the picture. The focus on the flaws in the financial system may hide other causes of the crisis. The polarisation in income distribution, in particular, tends to get glossed over as a potential cause of the crisis. This is not to deny the importance of financial factors. The crisis erupted as financial crisis for good reasons. The underlying accumulation regime had financial expansion as one of its key building blocks. However, what is at stake is more than financial system. This paper will thus argue that the present crisis should be understood as a crisis of neoliberalism. Financial deregulation is one of the components of neoliberalism, the polarisation of income distribution is another one; it is their interaction that provided the grounds for the crisis.

Project outline

The project will present empirical evidence on four channels through which the polarisation of income distribution has contributed to imbalances that erupted in the present crisis.

• Hypothesis 1: The polarisation of income distribution leads, other things equal to a decline in consumption demand as the consumption propensity of low income groups is higher and the consumption propensity of wage income is higher than that out of capital income.
• Hypothesis 2: External financial liberalisation has loosened balance of payment constraints on individual countries. As a result, two different growth models have emerged: In the Anglo-Saxon countries credit-led consumption growth has become the key variable to drive growth; in another group of countries growth of net export has become the main source of demand growth.
• Hypothesis 3: the increase of household debt in the USA has to some extent compensated for growth of wage income.
• Hypothesis 4: The increase in wealth inequality has increased speculation as richer household have a higher propensity to invest in risky assets. The project will evaluate these hypotheses empirically and discuss policy implications.

Project output

• Stockhammer, E. (2011) "Polarisierung der Einkommensverteilung als strukturelle Ursache der gegenwärtigen Finanz- und Wirtschaftskrise,"Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 37(3), pages 378-402.
• M. Lavoie & E. Stockhammer (eds) 2013. Wage-Led Growth. An Equitable Strategy for Economic Recovery (MacMillan)