Working paper n.3/2019

Escalation and Well-being

Fabio D’Orlando and Sharon Ricciotti
Università di Cassino e del Lazio Meridionale

June, 2019

Abstract: Escalation is a key characteristic of many consumption behaviors that has not received the theoretical attention it deserves. The aim of this paper is to propose both a definition and a theoretical treatment of escalation in consumption. We shall define escalation as the attempt to engage in consumption acts that are “more intense” on a measurable quantitative or qualitative, objective or subjective, scale (more difficult ski slopes, stronger drugs, harder sex, better restaurants, riskier games, etc.), even if, previously, the subject preferred less intense consumption behaviors. Further, this evolution in preferences also occurs if the budget constraint does not change. We will find endogenous and exogenous theoretical microfoundations for escalation in models of hedonic adaptation, desire for novelty, acquisition of consumption skills, rising aspirations, positional effects, and envy. However, we will also discuss the possibility that the tendency to escalate is a specific innate behavior inherent to human nature. Finally, we will propose a preliminary theoretical formalization of such behavior and indicate the possible implications of taking escalation into adequate consideration.

JEL codes: B52, D11, D90, D91, I31

Keywords: Escalation, hedonic adaptation, consumption skills, envy, innovativeness, positional effects, aspirations

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Working paper 2/2019

Keynes’s Investment Theory as a Micro-foundation for his Grandchildren

Sergio Nisticò
Università di Cassino e del Lazio Meridionale

Giugno, 2019

Abstract: In contrast with the ‘missing micro-foundations’ argument against Keynes’s macroeconomics, the paper argues that it is the present state of microeconomics that needs more solid ‘Keynesian foundations’. It is in particular Keynes’s understanding of investors’ behaviour that can be fruitfully extended to consumption theory, in a context in which consumers are considered as entrepreneurs, buying goods and services to engage in time-consuming activities. The paper emphasizes that the outcome in terms of enjoyment is particularly uncertain for those innovative and path-breaking activities, which Keynes discussed in his 1930 prophetic essay about us, the grandchildren of his contemporaries. Moreover, the Keynes-inspired microeconomics suggested in the paper provides an explanation of why Keynes’s prophecy about his grandchildren possibly expanding leisure did not materialize yet. The paper finally points at the need for appropriate economic policies supporting consumers’ propensity to enforce innovative forms of time use.

JEL codes: B41; D11; D81

Keywords: Keynesian microeconomics; Consumption; Time use; Uncertainty; Keynes’s grandchildren

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Working paper 1/2019


The Beveridge curve in the housing market

Gaetano Lisi
Università di Cassino e del Lazio Meridionale

Maggio, 2019

Abstract: As opposed to a recent criticism (according to which a model à la Pissarides inherently generates a downward sloping Beveridge curve), this preliminary theoretical paper shows that a baseline search-and-matching model is able to take into account the main distinctive features of the housing market, thus generating an upward sloping Beveridge curve.

JEL codes: J63; J64; R21; R31; R32

Keywords: Search-and-matching models, housing markets, Beveridge curve.

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Working paper 5/2018

Farsi male da soli
Disciplina esterna, domanda aggregata e il declino economico italiano

Sergio Cesaratto
Università di Siena


Gennaro Zezza
Università di Cassino e del Lazio Meridionale

Dicembre, 2018

Abstract: In questo saggio ripercorriamo la storia dell’economia italiana a partire dagli anni del miracolo economico, mostrando il ruolo della politica economica nelle sue diverse declinazioni (fiscale, monetaria, valutaria) nella determinazione della crescita, e poi del declino. Argomentiamo come i periodi della crescita siano caratterizzati dal tentativo di perseguire il pieno impiego, mentre il successivo periodo del declino è dipeso anche dal tentativo di risolvere i conflitti distributivi interni tramite vincoli esteri sempre più stringenti..

JEL codes: E52; E62; F41

Keywords: Italia; crescita; debito pubblico; saldi settoriali

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Working paper 4/2018

Job satisfaction, time allocation and labour supply

Gaetano Lisi
Dipartimento di Economia e Giurisprudenza, Università degli Studi di Cassino e del Lazio Meridionale

December, 2018

Abstract: This paper reinterprets the neoclassical theory of labour supply by introducing job satisfaction into the utility function of the worker. This integration is feasible and also straightforward from a theoretical point of view and, furthermore, it produces interesting results. Precisely, this extended version of the standard model of labour supply can describe situations in which working produces utility beyond consumption, with the result that the disutility of giving up leisure time is lowered or even reversed. As a result, the paper is able to reconcile the standard theory of labour supply with the well-established finding of happiness research, according to which working could yield substantial non-monetary benefits.

JEL codes: J28; J22; J24

Keywords: job satisfaction, time allocation, leisure, labour supply

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Working paper 3/2018

Shackle: an enquirer into choice

Marina BianchiSergio Nisticò
Dipartimento di Economia e Giurisprudenza, Università degli Studi di Cassino e del Lazio Meridionale

September, 2018

Abstract: Despite the several attempts to rework Shackle’s ideas using alternative non-mainstream approaches, Shackle was and has remained an outsider in the economic discipline. Shackle, however, is not a man alone if we take seriously what he thought of economics, as a discipline concerned with a subject that is not self-contained but open-ended and impermanent. Starting from an assessment of Schackle’s understanding of choice as creative, an uncaused cause that happens in a present in which the future must be imagined and for which the past provides no satisfyingly complete anticipations, the paper argues that Shackle should be rescued from the role of a nihilist where he is often relegated. In this perspective, a fundamental key to assessing the richness, originality and anticipatory character of Shackle’s contribution can be found in the recent developments of several “friendly” disciplines such as the psychology of motivations and of self-rewarding actions, narrative as the “science’ of the possible and the role of calendar time in choice theory. In fact, all these novel re-thinkings can contribute and to the understanding of Shackle’s main point, that human (and therefore economic) agents are active, creative enterprisers, who cut the deterministic thread by injecting the new in history to come, in making a difference in the future courses of action.

JEL codes: B31; D81; D91

Keywords: Shackle; Choice; Imagination; Time

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Working paper 2/2018

Problems, solutions and new problems with the third wave of technological unemployment

Fabio D’Orlando
Dipartimento di Economia e Giurisprudenza, Università degli Studi di Cassino e del Lazio Meridionale

July, 2018

Abstract: The aim of this paper is to discuss possible solutions to the “third wave” of technological unemployment and their main drawbacks. The process has just started and will only be fully realized in the future, but its main novelty is already well known and concerns robots (and artificial intelligence) entering the production process. Robots do not simply increase labor productivity, in cooperation with humans, but can totally substitute labor, making it possible to produce commodities without the use of human input. This in turn generates technological unemployment. Past “compensation” theories have argued that technological unemployment could be reabsorbed thanks to wage reduction and demand (and production) increase. But these theories have ignored robots. If robots are more productive and less expensive than humans, wage reduction may be insufficient due to the minimum wage subsistence boundary; and, in any case, an increase in demand would only determine an increase in the production of goods by robots alone, without any impact on human employment. Meanwhile, the resulting mass unemployment will require redistributive policies. The paper discusses the most relevant among these policies, emphasizing their drawbacks and their unwanted implications, and proposes an alternative rooted in Tietenberg’s tradable permits approach.

JEL codes: B12, D21, D30, E24, J64

Keywords: Technological unemployment, robots, artificial intelligence, unemployment, redistribution, compensation theory, tradable permits approach

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Working paper n.1/2018

Measuring economic vulnerability: a Structural Equation Modeling approach

Ambra Altimari – Simona Balzano – Gennaro Zezza
Dipartimento di Economia e Giurisprudenza, Università degli Studi di Cassino e del Lazio Meridionale

January, 2018

Abstract: The aim of this paper is to use a multivariate approach to improve the methodology for measuring the economic vulnerability of developing countries. The official index used by the United Nations, the Economic Vulnerability Index (EVI), is a composite indicator defined as the weighted average of a set of variables measuring i) the exposure to exogenous shocks and ii) the consequences of such shocks. We propose to extend the EVI model in order to include variables measuring resilience, i.e. the ability of a country to recover after a shock has occurred, and we evaluate the Structural Equation Model approach to compute a general vulnerability index. Since we analyse data covering 98 countries and 19 years we propose a strategy for dealing with repeated SEM results.

JEL codes: C33, F68, I32

Keywords: vulnerability, resilience, partial least squares, structural equation models

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Working paper n.1/2017

Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design

Giuseppina Gianfreda – Università della Tuscia and LLEE
Giovanna Vallanti – LUISS “Guido Carli” and LLEE

December, 2017

Abstract: Compliance with labour law has costs and benefits which may depend on the institutional environment in which firms operate. Although several studies have documented a negative effect of informality on firms productivity and growth it is a fact that firms may resort to undeclared employment to escape excessive tax or regulatory burden. We argue that firms may respond to strict employment protection legislation through accrued informality thus (partially) offsetting the negative effect of informality on productivity. We exploit the Italian dismissal legislation imposing higher firing costs for firms with more than 15 workers and show that informality reduces the turnover of formal jobs for firms above the 15 workers threshold; furthermore, while the overall effect of informality on firms productivity is negative, the differential effect for firms above the threshold as compared to smaller firms is positive and significant.

JEL codes: D02, D22, D24

Keywords: tax evasion, EPL, productivity, firm size, RD estimation

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Working paper 3/2016

Financialisation, Debt and Inequality: Export-led Mercantilist and Debt-led Private Demand Boom Economies in a Stock-flow consistent Model

Daniel Detzer

December, 2016

Abstract: In the era of financialisation, increasing income inequality could be observed in most developed and many developing countries. Despite these similar developments in inequality, the growth performance and drivers for growth differed markedly among countries, allowing clusters of different growth regimes to be identified. Among them are two extreme types: the debt-led private-demand boom and the export-led mercantilist economies. Whereas the former rely mainly on credit-financed household consumption in order to compensate for the potential lack of demand (associated with the depressing effect of financialisation), the latter rely on net exports as the main driver of aggregate demand. Using a stock-flow consistent model it will be demonstrated how increasing inequality, depending on a countries institutional structure and regulatory framework, affects growth differently, explaining the occurrence of both regime types.

JEL codes: E02 E12 E21 E25 E44 E65 F40 F41 F43

Keywords: international imbalances, finance-dominate capitalism, financialisation, debt, emulation, stock-flow consistent model

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