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11. The Exorbitant Privilege of High Tax Countries

Author:
Vincent Vicard
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
The well documented US excess returns on its net foreign assets is no exception at the world level. Excess returns on foreign assets owe largely to yield differential within the FDI asset class and are correlated to the corporate tax rate for a large sample of countries, consistently with tax motivated profit shifting by multinational corporations. Using French firm level data on dividends and reinvested earnings from foreign affiliates, I provide evidence and quantify the impact of corporate tax avoidance on international asset returns. Profit shifting inflates the investment income balance and accounts for the average 2 percentage points return differential between French FDI assets and liabilities. Missing profts in France, estimated at €36 billions or 1.6% of GDP in 2015, are mostly shifted to EU countries.
Topic:
Economics, International Political Economy, European Union, GDP, Tax Systems, Profit, and Corporate Tax
Political Geography:
United States and France

12. Business & Peace 2019

Publication Date:
09-2019
Content Type:
Special Report
Institution:
Institute for Economics & Peace (IEP)
Abstract:
This report analyses the relationship between the economic performance of a country and its levels of peace. The major finding of this report is that peace acts as a good predictor of a country’s future performance in a number of macroeconomic indicators. These insights can be used to better assess the expected investment potential of countries. Rather than asking what businesses can do for peace, the study differentiates itself from other work by focusing on what peace can offer businesses. Institute for Economics & Peace (IEP) sees this as an important but missing step in business analysis. In order for businesses to be an actor in building peace, investors first need to see the benefits of peace to their investment decisions. The results of this work show that economic performance can be predicted by understanding the movement in the same socio-economic factors that affect peacefulness. These conditions are known as Positive Peace. The countries that improved the most in Positive Peace between 2010 and 2016 also had substantially above average economic performance.
Topic:
Economics, Peace Studies, Business, Economic Growth, Investment, Peace, and Profit
Political Geography:
Global Focus

13. Resource Sovereignty: The Agenda for Africa’s Exit from the State Plunder

Author:
Tricontinental: Institute for Social Research
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Tricontinental: Institute for Social Research
Abstract:
The modern global economy, essentially guarantees the continued expatriation of profits and natural assets from resource-rich but capital-poor countries, facilitating the enrichment of the global economic elite and Multinational Corporations (MNC), at the expense of developing countries. To elaborate on the themes of corporate plunder, resource nationalism and people-centered forms of resource management, Tricontinental: Institute for Social Research spoke with Gyekye Tanoh, head of the Political Economy Unit at the Third World Network-Africa based in Accra (Ghana).
Topic:
Economics, Globalization, Natural Resources, Multinational Corporations, and Profit
Political Geography:
Global Focus

14. Conditional Pricing of Currency Risk in Africa's Equity Market

Author:
Odongo Kodongo and Kalu Ojah
Publication Date:
01-2018
Content Type:
Research Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
In this paper, we sought to establish whether Africa’s volatile currencies drive equity risk premium. We use the stochastic discount factor (SDF) framework to estimate various conditional specifications of the International Capital Asset Pricing Model through generalized method of moments technique. Our results show strong evidence of conditional, time-varying currency risk premium in equity returns. Currency risk is also perceived by international investors as important in informing the equities pricing kernel. We also find evidence that international investors are worried about Africa’s small size equity markets and build anticipated low trading into their pricing calculus.
Topic:
Development, Economics, International Trade and Finance, Global Political Economy, Economic Growth, Capital Flows, Currency, and Profit
Political Geography:
Africa

15. Estimating the Size and Trends of the Informal Economy in Ghana

Author:
Matthew Kofi Ocran
Publication Date:
01-2018
Content Type:
Research Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
The purpose of this paper is to quantitatively examine the evolution of the informal economy over the past four decades. The study used the currency demand approach as analytical framework for the assessment. The findings suggest that there has been an upward trend in the size of the informal economy as a proportion of the officially recorded GDP. For instance, the size of the informal economy as a proportion of the official GDP estimates increased steadily, from 14% in 1960 to 18% by 1977. The proportion fell thereafter and started picking up again from 1983 to a new high of 30% between 2003 and 2004. The outcome of the study has policy implications particularly for the design of effective monetary and fiscal policy and the selection of appropriate policy instruments.
Topic:
Development, Economics, International Political Economy, Monetary Policy, Economic Growth, Fiscal Policy, and Profit
Political Geography:
Africa and Ghana

16. Explaining the Historic Rise in Financial Profits in the US Economy

Author:
Costas Lapavitsas and Ivan Mendieta-Muñoz
Publication Date:
10-2017
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The ratio of financial to non-financial profits in the US economy has increased sharply since the 1970s, the period that is often called the financialisation of capitalism. By developing a two-sector theoretical model the ratio of financial to non-financial profits is shown to depend positively on the net interest margin and the non-interest income of banks, while it depends negatively on the general rate of profit, the non-interest expenses of banks, and the ratio of the capital stock to interest-earning assets. The model was estimated empirically for the post-war period and the results indicate that the ratio has varied mainly with respect to the net interest margin, although non-interest income has also played a significant role. The results confirm that in the course of financialisation the US financial sector has been able to extract rising profits through interest differentials and non-interest income, while the general rate of profit has remained broadly constant.
Topic:
Economics, Finance, Economic Growth, and Profit
Political Geography:
North America and United States of America

17. Household Borrowing and the Possibility of “Consumption- Driven, Profit-Led Growth”

Author:
Mark Setterfield and Yun K. Kim
Publication Date:
01-2016
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
We first show that, with a Kaleckian structure that is consistent with Pasinetti (1962), the relationship between distribution and growth is more robust than conventional wisdom suggests. Next, we extend our model by incorporating borrowing and emulation effects into workers’ consumption behavior, under different assumptions about how debt is serviced. Our results demonstrate that borrowing and emulation transform the relationship between distribution and growth, giving rise to the possibility of a “consumption-driven, profit-led” growth regime (Kapeller and Schütz, 2015) and what we call the “paradox of inequality.” A key conclusion is that the wage-or -profit led characteristics of the growth process, rather than being invariant, can be altered by social constructs such as borrowing and consumption norms that change over time.
Topic:
Economics, Economic Growth, Economic Theory, Profit, Homeownership, and Consumerism
Political Geography:
Global Focus

18. Debt Servicing, Aggregate Consumption, and Growth

Author:
Mark Setterfield and Yun K. Kim
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
We develop a neo-Kaleckian growth model that emphasizes the importance of consumption behavior. In our model, workers first make consumption decisions based on their gross income, and then treat debt servicing commitments as a substitute for saving. Workers’ borrowing is induced by their desire to keep up with the consumption standard set by rentiers’ consumption, reflecting an aspect of the relative income hypothesis. As a result of this consumption and debt servicing behavior, consumer debt accumulation and income distribution have effects on aggregate demand, profitability, and economic growth that differ from those found in existing models. We also investigate the financial sustainability of the Golden Age and Neoliberal growth regimes within our framework. It is shown that distributional changes between the Golden Age and the Neoliberal regimes, together with corresponding changes in consumption emulation behavior via expenditure cascades, suffice to make the Neoliberal growth regime unsustainable.
Topic:
Debt, Economics, Economic Growth, Economic Theory, Profit, Sustainability, Models, and Consumption
Political Geography:
Global Focus