Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

 

Public traded companies are always under pressure to show earnings growth and sales revenue growth to enhance shareholder value.

 

How do they do it when markets have matured and economy has slowed?

  • Lower Costs
  • Increase Market Share

 

How do then companies lower their costs?

  • Vertical Mergers and Acquisitions
  • Outsourcing (Sourcing parts and components / Intermediate Goods / Inputs from cross border)
  • Offshoring (Shifting Production cross border)
  • Vertical Integration

 

How do then companies increase their market share?

  • Horizontal Mergers and Acquisitions
  • Cross Border Markets Share (Sales in other countries)

 

In the last thirty years, this is exactly what has happened in US economy.

Macro Trends of Outsourcing/Offshoring, Market Concentration, Inequality, Corporate Profits, Equity Prices, Productivity Growth, Interest Rates, Labor Share, and Capital Share.

Please see my other posts expanding on these issues.

Please note that these forces are continuing and trends will remain on current trajectory.

 

Key Terms:

  • Stakeholder vs Shareholder Capitalism
  • Short Termism
  • Slow Productivity Growth
  • Rising Market Concentration
  • Rising Profits
  • Rising Equities Market
  • Rising Inequality
  • Dupont Ratio Analysis
  • Financial Planning (Micro – Firm Level)
  • Economic Planning (Macro- Aggregate Level)
  • Quarterly Capitalism

 

From SHAREHOLDER CAPITALISM: A SYSTEM IN CRISIS

Our current, highly financialised, form of shareholder capitalism is not just failing to provide new capital for investment, it is actively undermining the ability of listed companies to reinvest their own profits. The stock market has become a vehicle for extracting value from companies, not for injecting it.

No wonder that Andy Haldane, Chief Economist of the Bank of England, recently suggested that shareholder capitalism is ‘eating itself.’1 Corporate governance has become dominated by the need to maximise short-term shareholder returns. At the same time, financial markets have grown more complex, highly intermediated, and similarly shorttermist, with shares increasingly seen as paper assets to be traded rather than long term investments in sound businesses.

This kind of trading is a zero-sum game with no new wealth, let alone social value, created. For one person to win, another must lose – and increasingly, the only real winners appear to be the army of financial intermediaries who control and perpetuate the merry-goround. There is nothing natural or inevitable about the shareholder-owned corporation as it currently exists. Like all economic institutions, it is a product of political and economic choices which can and should be remade if they no longer serve our economy, society, or environment.

Here’s the impact this shareholder model is currently having:
• Economy: Shareholder capitalism is holding back productive investment. Even the Chief Executive of BlackRock, the world’s largest asset manager, has admitted that pressure to keep the share price high means corporate leaders are ‘underinvesting in innovation, skilled workforces or essential capital expenditures.’ 2
• Society: Shareholder capitalism is driving inequality. There is growing evidence that attempts to align executive pay with shareholder value are largely responsible for the ballooning of salaries at the top. The prioritisation of shareholder interests has also contributed to a dramatic decline in UK wages relative to profits, helping to explain the failure of ordinary people’s living standards to rise in line with economic growth.
• Environment: Shareholder capitalism helps to drive environmental destruction. It does this by driving risky shortterm behaviour, such as fossil fuel extraction, which ignores long-term environmental risks.

The idea that shareholder capitalism is the most efficient way to mobilise large amounts of capital is no longer tenable.

We need both to create new models of companies, and implement new ways of organising investment that are fit for building an inclusive, equal, and sustainable economy.

Companies should be explicitly accountable to a mission and a set of interests beyond shareholder returns. Equally, investment must provide long-term capital for socially and environmentally useful projects, and damaging forms of speculation must be restricted.

For most people, our economy simply is not working, and the damaging aspects of shareholder capitalism are at least in part responsible. Reforming shareholder capitalism must not be dismissed as too difficult – the crisis is too urgent for that. We can take the first steps towards a better economic model right now. It’s time to act.

 

 

A Crash Course in Dupont Financial Ratio Analysis

 

  • What happens when economic growth slows ?
  • What happens when profit margins decline ?
  • What happens when Sales growth is limited ?
  • What does lead to Mergers and Acquisitions ?
  • What is the impact of Cost of Capital ?
  • What is EVA (Economic Value Added) ?
  • What is impact of Outsourcing/Offshoring on Financial Ratios ?
  • What is impact of Mergers and Acquisitions on Financial Ratios ?
  • What is impact of Stock Buy Backs on Financial Ratios ?
  • What is impact of Dividends on Financial Ratios ?
  • ROS (Return on Sales)
  • ROE (Return on Equities)
  • ROA (Return on Assets)
  • ROIC (Return on Invested Capital)
  • EVA (Economic Value Added)
  • MVA (Market Value Added)

From The DuPont Equation, ROE, ROA, and Growth

The DuPont Equation

The DuPont equation is an expression which breaks return on equity down into three parts: profit margin, asset turnover, and leverage.

Learning Objectives

Explain why splitting the return on equity calculation into its component parts may be helpful to an analyst

Key Takeaways

Key Points

  • By splitting ROE into three parts, companies can more easily understand changes in their returns on equity over time.
  • As profit margin increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.
  • As asset turnover increases, a company will generate more sales per asset owned, resulting in a higher overall return on equity.
  • Increased financial leverage will also lead to an increase in return on equity, since using more debt financing brings on higher interest payments, which are tax deductible.

Key Terms

  • competitive advantage: something that places a company or a person above the competition

The DuPont Equation

image

DuPont Model: A flow chart representation of the DuPont Model.

The DuPont equation is an expression which breaks return on equity down into three parts. The name comes from the DuPont Corporation, which created and implemented this formula into their business operations in the 1920s. This formula is known by many other names, including DuPont analysis, DuPont identity, the DuPont model, the DuPont method, or the strategic profit model.

The DuPont Equation: In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage.

Under DuPont analysis, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage. By splitting ROE (return on equity) into three parts, companies can more easily understand changes in their ROE over time.

Components of the DuPont Equation: Profit Margin

Profit margin is a measure of profitability. It is an indicator of a company’s pricing strategies and how well the company controls costs. Profit margin is calculated by finding the net profit as a percentage of the total revenue. As one feature of the DuPont equation, if the profit margin of a company increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.

Components of the DuPont Equation: Asset Turnover

Asset turnover is a financial ratio that measures how efficiently a company uses its assets to generate sales revenue or sales income for the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins tend to have low asset turnover. Similar to profit margin, if asset turnover increases, a company will generate more sales per asset owned, once again resulting in a higher overall return on equity.

Components of the DuPont Equation: Financial Leverage

Financial leverage refers to the amount of debt that a company utilizes to finance its operations, as compared with the amount of equity that the company utilizes. As was the case with asset turnover and profit margin, Increased financial leverage will also lead to an increase in return on equity. This is because the increased use of debt as financing will cause a company to have higher interest payments, which are tax deductible. Because dividend payments are not tax deductible, maintaining a high proportion of debt in a company’s capital structure leads to a higher return on equity.

The DuPont Equation in Relation to Industries

The DuPont equation is less useful for some industries, that do not use certain concepts or for which the concepts are less meaningful. On the other hand, some industries may rely on a single factor of the DuPont equation more than others. Thus, the equation allows analysts to determine which of the factors is dominant in relation to a company’s return on equity. For example, certain types of high turnover industries, such as retail stores, may have very low profit margins on sales and relatively low financial leverage. In industries such as these, the measure of asset turnover is much more important.

High margin industries, on the other hand, such as fashion, may derive a substantial portion of their competitive advantage from selling at a higher margin. For high end fashion and other luxury brands, increasing sales without sacrificing margin may be critical. Finally, some industries, such as those in the financial sector, chiefly rely on high leverage to generate an acceptable return on equity. While a high level of leverage could be seen as too risky from some perspectives, DuPont analysis enables third parties to compare that leverage with other financial elements that can determine a company’s return on equity.

ROE and Potential Limitations

Return on equity measures the rate of return on the ownership interest of a business and is irrelevant if earnings are not reinvested or distributed.

Learning Objectives

Calculate a company’s return on equity

Key Takeaways

Key Points

  • Return on equity is an indication of how well a company uses investment funds to generate earnings growth.
  • Returns on equity between 15% and 20% are generally considered to be acceptable.
  • Return on equity is equal to net income (after preferred stock dividends but before common stock dividends) divided by total shareholder equity (excluding preferred shares ).
  • Stock prices are most strongly determined by earnings per share (EPS) as opposed to return on equity.

Key Terms

  • fundamental analysis: An analysis of a business with the goal of financial projections in terms of income statement, financial statements and health, management and competitive advantages, and competitors and markets.

Return On Equity

Return on equity (ROE) measures the rate of return on the ownership interest or shareholders’ equity of the common stock owners. It is a measure of a company’s efficiency at generating profits using the shareholders’ stake of equity in the business. In other words, return on equity is an indication of how well a company uses investment funds to generate earnings growth. It is also commonly used as a target for executive compensation, since ratios such as ROE tend to give management an incentive to perform better. Returns on equity between 15% and 20% are generally considered to be acceptable.

The Formula

Return on equity is equal to net income, after preferred stock dividends but before common stock dividends, divided by total shareholder equity and excluding preferred shares.

Return On Equity: ROE is equal to after-tax net income divided by total shareholder equity.

Expressed as a percentage, return on equity is best used to compare companies in the same industry. The decomposition of return on equity into its various factors presents various ratios useful to companies in fundamental analysis.

ROE Broken Down: This is an expression of return on equity decomposed into its various factors.

The practice of decomposing return on equity is sometimes referred to as the “DuPont System. ”

Potential Limitations of ROE

Just because a high return on equity is calculated does not mean that a company will see immediate benefits. Stock prices are most strongly determined by earnings per share (EPS) as opposed to return on equity. Earnings per share is the amount of earnings per each outstanding share of a company’s stock. EPS is equal to profit divided by the weighted average of common shares.

Earnings Per Share: EPS is equal to profit divided by the weighted average of common shares.

The true benefit of a high return on equity comes from a company’s earnings being reinvested into the business or distributed as a dividend. In fact, return on equity is presumably irrelevant if earnings are not reinvested or distributed.

Assessing Internal Growth and Sustainability

Sustainable– as opposed to internal– growth gives a company a better idea of its growth rate while keeping in line with financial policy.

Learning Objectives

Calculate a company’s internal growth and sustainability ratios

Key Takeaways

Key Points

  • The internal growth rate is a formula for calculating the maximum growth rate a firm can achieve without resorting to external financing.
  • Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy.
  • Another measure of growth, the optimal growth rate, assesses sustainable growth from a total shareholder return creation and profitability perspective, independent of a given financial strategy.

Key Terms

  • retention: The act of retaining; something retained
  • retention ratio: retained earnings divided by net income
  • sustainable growth rate: the optimal growth from a financial perspective assuming a given strategy with clear defined financial frame conditions/ limitations

Internal Growth and Sustainability

The true benefit of a high return on equity arises when retained earnings are reinvested into the company’s operations. Such reinvestment should, in turn, lead to a high rate of growth for the company. The internal growth rate is a formula for calculating maximum growth rate that a firm can achieve without resorting to external financing. It’s essentially the growth that a firm can supply by reinvesting its earnings. This can be described as (retained earnings)/(total assets ), or conceptually as the total amount of internal capital available compared to the current size of the organization.

We find the internal growth rate by dividing net income by the amount of total assets (or finding return on assets ) and subtracting the rate of earnings retention. However, growth is not necessarily favorable. Expansion may strain managers’ capacity to monitor and handle the company’s operations. Therefore, a more commonly used measure is the sustainable growth rate.

Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy, such as target debt to equity ratio, target dividend payout ratio, target profit margin, or target ratio of total assets to net sales.

We find the sustainable growth rate by dividing net income by shareholder equity (or finding return on equity) and subtracting the rate of earnings retention. While the internal growth rate assumes no financing, the sustainable growth rate assumes you will make some use of outside financing that will be consistent with whatever financial policy being followed. In fact, in order to achieve a higher growth rate, the company would have to invest more equity capital, increase its financial leverage, or increase the target profit margin.

Optimal Growth Rate

Another measure of growth, the optimal growth rate, assesses sustainable growth from a total shareholder return creation and profitability perspective, independent of a given financial strategy. The concept of optimal growth rate was originally studied by Martin Handschuh, Hannes Lösch, and Björn Heyden. Their study was based on assessments on the performance of more than 3,500 stock-listed companies with an initial revenue of greater than 250 million Euro globally, across industries, over a period of 12 years from 1997 to 2009.

image

Revenue Growth and Profitability: ROA, ROS and ROE tend to rise with revenue growth to a certain extent.

Due to the span of time included in the study, the authors considered their findings to be, for the most part, independent of specific economic cycles. The study found that return on assets, return on sales and return on equity do in fact rise with increasing revenue growth of between 10% to 25%, and then fall with further increasing revenue growth rates. Furthermore, the authors attributed this profitability increase to the following facts:

  1. Companies with substantial profitability have the opportunity to invest more in additional growth, and
  2. Substantial growth may be a driver for additional profitability, whether by attracting high performing young professionals, providing motivation for current employees, attracting better business partners, or simply leading to more self-confidence.

However, according to the study, growth rates beyond the “profitability maximum” rate could bring about circumstances that reduce overall profitability because of the efforts necessary to handle additional growth (i.e., integrating new staff, controlling quality, etc).

Dividend Payments and Earnings Retention

The dividend payout and retention ratios offer insight into how much of a firm’s profit is distributed to shareholders versus retained.

Learning Objectives

Calculate a company’s dividend payout and retention ratios

Key Takeaways

Key Points

  • Many corporations retain a portion of their earnings and pay the remainder as a dividend.
  • Dividends are usually paid in the form of cash, store credits, or shares in the company.
  • Cash dividends are a form of investment income and are usually taxable to the recipient in the year that they are paid.
  • Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends.
  • Retained earnings can be expressed in the retention ratio.

Key Terms

  • stock split: To issue a higher number of new shares to replace old shares. This effectively increases the number of shares outstanding without changing the market capitalization of the company.

Dividend Payments and Earnings Retention

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. On the other hand, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation takes a loss, then that loss is retained and called variously retained losses, accumulated losses or accumulated deficit. Retained earnings and losses are cumulative from year to year with losses offsetting earnings. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

A dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. Retained earnings are shown in the shareholder equity section in the company’s balance sheet –the same as its issued share capital.

Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a “special dividend” to distinguish it from the fixed schedule dividends. Dividends are usually paid in the form of cash, store credits (common among retail consumers’ cooperatives), or shares in the company (either newly created shares or existing shares bought in the market). Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.

Cash dividends (most common) are those paid out in currency, usually via electronic funds transfer or a printed paper check. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid. This is the most common method of sharing corporate profits with the shareholders of the company. For each share owned, a declared amount of money is distributed. Thus, if a person owns 100 shares and the cash dividend is $0.50 per share, the holder of the stock will be paid $50. Dividends paid are not classified as an expense but rather a deduction of retained earnings. Dividends paid do not show up on an income statement but do appear on the balance sheet.

image

Example Balance Sheet: Retained earnings can be found on the balance sheet, under the owners’ (or shareholders’) equity section.

Stock dividends are those paid out in the form of additional stock shares of the issuing corporation or another corporation (such as its subsidiary corporation). They are usually issued in proportion to shares owned (for example, for every 100 shares of stock owned, a 5% stock dividend will yield five extra shares). If the payment involves the issue of new shares, it is similar to a stock split in that it increases the total number of shares while lowering the price of each share without changing the market capitalization, or total value, of the shares held.

Dividend Payout and Retention Ratios

Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:

The part of the earnings not paid to investors is left for investment to provide for future earnings growth. These retained earnings can be expressed in the retention ratio. Retention ratio can be found by subtracting the dividend payout ratio from one, or by dividing retained earnings by net income.

Dividend Payout Ratio: The dividend payout ratio is equal to dividend payments divided by net income for the same period.

Relationships between ROA, ROE, and Growth

Return on assets is a component of return on equity, both of which can be used to calculate a company’s rate of growth.

Learning Objectives

Discuss the different uses of the Return on Assets and Return on Assets ratios

Key Takeaways

Key Points

  • Return on equity measures the rate of return on the shareholders ‘ equity of common stockholders.
  • Return on assets shows how profitable a company’s assets are in generating revenue.
  • In other words, return on assets makes up two-thirds of the DuPont equation measuring return on equity.
  • Capital intensity is the term for the amount of fixed or real capital present in relation to other factors of production. Rising capital intensity pushes up the productivity of labor.

Key Terms

  • return on common stockholders’ equity: a fiscal year’s net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage
  • quantitatively: With respect to quantity rather than quality.

Return On Assets Versus Return On Equity

In review, return on equity measures the rate of return on the ownership interest (shareholders’ equity) of common stockholders. Therefore, it shows how well a company uses investment funds to generate earnings growth. Return on assets shows how profitable a company’s assets are in generating revenue. Return on assets is equal to net income divided by total assets.

Return On Assets: Return on assets is equal to net income divided by total assets.

This percentage shows what the company can do with what it has (i.e., how many dollars of earnings they derive from each dollar of assets they control). This is in contrast to return on equity, which measures a firm’s efficiency at generating profits from every unit of shareholders’ equity. Return on assets is, however, a vital component of return on equity, being an indicator of how profitable a company is before leverage is considered. In other words, return on assets makes up two-thirds of the DuPont equation measuring return on equity.

ROA, ROE, and Growth

In terms of growth rates, we use the value known as return on assets to determine a company’s internal growth rate. This is the maximum growth rate a firm can achieve without resorting to external financing. We use the value for return on equity, however, in determining a company’s sustainable growth rate, which is the maximum growth rate a firm can achieve without issuing new equity or changing its debt-to-equity ratio.

Capital Intensity and Growth

Return on assets gives us an indication of the capital intensity of the company. “Capital intensity” is the term for the amount of fixed or real capital present in relation to other factors of production, especially labor. The underlying concept here is how much output can be procured from a given input (assets!). The formula for capital intensity is below:

Capital Intensity=Total AssetsSales

The use of tools and machinery makes labor more effective, so rising capital intensity pushes up the productivity of labor. While companies that require large initial investments will generally have lower return on assets, it is possible that increased productivity will provide a higher growth rate for the company. Capital intensity can be stated quantitatively as the ratio of the total money value of capital equipment to the total potential output. However, when we adjust capital intensity for real market situations, such as the discounting of future cash flows, we find that it is not independent of the distribution of income. In other words, changes in the retention or dividend payout ratios can lead to changes in measured capital intensity.

 

 

1280px-DuPontModelEng.svg

Please see my related posts:

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Why do Firms buyback their Shares? Causes and Consequences.

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

Trading Down: NAFTA, TPP, TATIP and Economic Globalization

On Inequality of Wealth and Income – Causes and Consequences

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Low Interest Rates and Business Investments : Update August 2017

Low Interest Rates and Monetary Policy Effectiveness

Low Interest Rates and Banks’ Profitability : Update July 2017

Short term Thinking in Investment Decisions of Businesses and Financial Markets

Mergers and Acquisitions – Long Term Trends and Waves

Business Investments and Low Interest Rates

The Decline in Long Term Real Interest Rates

Low Interest Rates and Banks Profitability: Update – December 2016

 

 Key Sources of Research:

 

 

 

The DuPont Equation, ROE, ROA, and Growth

https://courses.lumenlearning.com/boundless-finance/chapter/the-dupont-equation-roe-roa-and-growth/

 

 

Short-Termism in business: causes, mechanisms and consequences

EY Poland Report

 

https://www.ey.com/Publication/vwLUAssets/EY_Poland_Report/%24FILE/Short-termism_raport_EY.pdf

 

 

Shareholders vs Stakeholders Capitalism

Fabian Brandt

Goethe University

Konstantinos Georgiou

University of Pennsylvania

 

https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1002&context=fisch_2016

 

 

Hedrick Smith Speaks to the Community about Who Stole the American Dream.

 

http://nhlabornews.com/2013/10/hedrick-smith-speaks-to-the-community-about-who-stole-the-american-dream/

 

 

Let’s Talk About “Maximizing Shareholder Value”

https://www.pragcap.com/lets-talk-about-maximizing-shareholder-value/

 

 

SHAREHOLDER CAPITALISM: A SYSTEM IN CRISIS

 

New Economics Foundation

 

https://neweconomics.org/uploads/files/NEF_SHAREHOLDER-CAPITALISM_E_latest.pdf

 

 

 

THE HISTORICAL CONTEXT OF SHAREHOLDER VALUE CAPITALISM

 

Mark S. Mizruchi and Howard Kirneldorf

 

https://pdfs.semanticscholar.org/63d9/191bbc2b82f351633c7379deea7b9ccad0e9.pdf

 

 

Shareholder capitalism on trial

 

By Robert J. Samuelson

 

http://www.law.harvard.edu/programs/corp_gov/MediaMentions/03-19-15_WashingtonPost.pdf

 

 

 

The real business of business

McKinsey

 

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Corporate%20Finance/MoF/Issue%2053/MoF53_The_real_business_of_business.ashx

 

 

 

Managers and Market Capitalism

 

Rebecca Henderson Karthik Ramanna

HBR

 

https://www.hbs.edu/faculty/conferences/2013-sustainability-and-corporation/Documents/Henderson_Ramanna___Managers_and_Market_Capitalism___March_2013.pdf

 

 

The Embedded Firm: Corporate Governance, Labor, and Finance Capitalism

Peer Zumbansen

Cynthia A. Williams

 

http://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?article=1056&context=clpe

 

 

 

 

Andrew G Haldane: Who owns a company?

Speech by Mr Andrew G Haldane,

Executive Director and Chief Economist of the Bank of England,

at the University of Edinburgh Corporate Finance Conference, Edinburgh,

22 May 2015.

 

https://www.bis.org/review/r150811a.pdf

 

 

 

 

Capitalism for the Long Term

MARCH 2011
HBR

The Short Long

 

Speech by
Andrew G Haldane, Executive Director, Financial Stability, and Richard Davies

29th Societé Universitaire Europeene de Recherches Financieres Colloquium: New Paradigms in Money and Finance?

Brussels

May 2011

 

https://www.bankofengland.co.uk/-/media/boe/files/speech/2011/the-short-long-speech-by-andrew-haldane

 

 

 

 

Is short-termism wrecking the economy?

Redefining capitalism

By Eric Beinhocker and Nick Hanauer

Fast finance and slow growth

 

Andy Haldane

http://progressive-policy.net/2015/09/fast-finance-and-slow-growth/

 

Beyond Shareholder Value

The reasons and choices for corporate governance reform

https://www.tuc.org.uk/sites/default/files/BSV.pdf

 

 

AN ECONOMY FOR THE 99%

It’s time to build a human economy that benefits everyone, not just the privileged few

OXFAM

 

https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/bp-economy-for-99-percent-160117-en.pdf

 

 

Short-Termism

By Douglas K. Chia

 

https://www.law.columbia.edu/sites/default/files/microsites/millstein-center/files/10Anniversary/01181_millstein_10th_anniversary_essay_2_chia_v2.pdf

 

 

 

The Future of Finance

THE LSE REPORT

 

http://www.lse.ac.uk/fmg/assets/documents/paul-woolley-centre/articles-of-general-interest/future-of-finance-chapter-3.pdf

 

 

 

Is Short-Term Behavior Jeopardizing the Future Prosperity of Business?

 

http://www.wlrk.com/docs/IsShortTermBehaviorJeopardizingTheFutureProsperityOfBusiness_CEOStrategicImplications.pdf

 

 

 

 

How Effective Capital Regulation can Help Reduce the Too‐Big‐To‐Fail Problem

Anat Admati

Stanford University

 

http://bankersnewclothes.com/wp-content/uploads/2016/04/Minn-Fed-combined.pdf

 

 

 

Business School’s Worst Idea: Why the “Maximize Shareholder Value” Theory Is Bogus

Yves Smith

http://evonomics.com/maximize-shareholder-value-theory-yves-smith/

 

 

 

When Shareholder Capitalism Came to Town

The American Prospect

http://prospect.org/article/when-shareholder-capitalism-came-town

 

 

 

Competition Conference 2018

What’s the Evidence for Strengthening Competition Policy?

Boston University

July 2018

http://sites.bu.edu/tpri/competition-conference-2018/

 

 

 

Market Concentration

Issues paper by the Secretariat
6-8 June 2018

This document was prepared by the OECD Secretariat to serve as an issues paper for the hearing on market concentration taking place at the 129th meeting of the OECD Competition Committee on 6-8 June 2018

https://one.oecd.org/document/DAF/COMP/WD(2018)46/en/pdf

 

 

 

 

Monopoly’s New Era

In today’s economy, many industries can’t be analyzed through the lens of competition.

Chazen Global Insights
May 13, 2016

 

https://www8.gsb.columbia.edu/articles/chazen-global-insights/monopoly-s-new-era

 

 

 

Market power in the U.S. economy today

Washington Center for Equitable Growth

http://equitablegrowth.org/research-analysis/market-power-in-the-u-s-economy-today/

 

 

 

Don’t Panic: A Guide to Claims of Increasing Concentration

Gregory J. Werden

Luke Froeb

 

Date Written: April 5, 2018

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3156912

 

 

 

Market concentration

OECD

http://www.oecd.org/daf/competition/market-concentration.htm

 

 

 

 

A Firm-Level Perspective on the Role of Rents in the Rise in Inequality

Jason Furman Peter Orszag1

October 16, 2015

http://gabriel-zucman.eu/files/teaching/FurmanOrszag15.pdf

 

 

 

Do the Productivity Slowdown and the Inequality Increase Have a Common Cause?

Jason Furman (joint work with Peter Orszag)

Peterson Institute for International Economics
Washington, DC
November 9, 2017

https://piie.com/system/files/documents/4-1furman20171109ppt.pdf

 

 

 

Is There a Connection Between Market Concentration and the Rise in Inequality?

https://promarket.org/connection-market-concentration-rise-inequality/

 

 

 

Concentrating on the Fall of the Labor Share

David; Dorn, David; Katz, Lawrence F; Patterson, Christina; Reenen, John Van

https://pdfs.semanticscholar.org/cbc2/b8d7a989cab4b76e7fe795bf4572dbcdd0bc.pdf

 

 

 

 

Business Investment Spending Slowdown

April 9, 2018

FAS Congressional Research Services

Marc Labonte

https://fas.org/sgp/crs/misc/IN10882.pdf

 

 

 

 

Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents

Lina Khan and Sandeep Vaheesan

http://harvardlpr.com/wp-content/uploads/2017/02/HLP110.pdf

 

 

 

Five Myths about Economic Inequality in America

By Michael D. Tanner
September 7, 2016

 

Cato Institiute

https://www.cato.org/publications/policy-analysis/five-myths-about-economic-inequality-america

 

 

 

 

Is the US Public Corporation in Trouble?

Kathleen M. Kahle and René M. Stulz

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.31.3.67

 

 

 

Declining Labor and Capital Shares

Simcha Barkai

http://www.eco.uc3m.es/~mkredler/ReadGr/FeijooOnBarkai17.pdf

 

 

 

Growing Productivity without Growing Wages: The Micro-Level Anatomy of the Aggregate Labor Share Decline

Kehrig, Matthias; Vincent, Nicolas

(2017)

https://www.econstor.eu/bitstream/10419/161893/1/cesifo1_wp6454.pdf

 

 

 

 

Declining Competition and Investment in the U.S.

Germán Gutiérrez† and Thomas Philippon‡

March 2017

https://www8.gsb.columbia.edu/faculty-research/sites/faculty-research/files/finance/Macro%20Lunch/IK_Comp_v1.pdf

 

 

 

ACCOUNTING FOR RISING CORPORATE PROFITS: INTANGIBLES OR REGULATORY
RENTS?

James Bessen

Boston University School of Law

November 9, 2016

https://www.bu.edu/law/files/2016/11/Accounting-for-Rising-Corporate-Profits.pdf

 

 

 

 

Kaldor and Piketty’s facts: The rise of monopoly power in the United States

Gauti Eggertsson
Jacob A. Robbins
Ella Getz Wold

Feb 2018

https://equitablegrowth.org/wp-content/uploads/2018/02/02052018-WP-kaldor-piketty-monopoly-power.pdf

 

 

 

 

Is There an Investment Gap in Advanced Economies? If So, Why?

Robin Döttling

German Gutierrez Gallardo

Thomas Philippon

 

Date Written: July 2017

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3002796

 

 

 

 

Antitrust in a Time of Populism

Professor Carl Shapiro

CRESSE 2017 Heraklion – Crete, Greece

2 July 2017
http://www.cresse.info/uploadfiles/2017_Key_SHAPIRO.pdf

 

 

 

The Incredible Shrinking Universe of Stocks

The Causes and Consequences of Fewer U.S. Equities

Credit Suisse

March 2917

https://www.cmgwealth.com/wp-content/uploads/2017/03/document_1072753661.pdf

 

 

 

Declining Competition and Investment in the U.S

German Gutierrez Gallardo

Thomas Philippon

 

Date Written: December 2017

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3095586

 

 

 

 

The Fall and Rise of Market Power in Europe

John P. Weche and Achim Wambach

https://ub-madoc.bib.uni-mannheim.de/44598/1/dp18003.pdf

https://www.econstor.eu/bitstream/10419/173383/1/1011811367.pdf

 

 

 

 

On the Formation of Capital and Wealth: IT, Monopoly Power and Rising Inequality

Mordecai Kurz,

Stanford University

2018

https://pdfs.semanticscholar.org/6564/e50bf8be5c75f1cca2e9e3d4afa4b8b8ac84.pdf

 

 

 

 

Appendix for \Investment-less Growth: An Empirical Investigation”

 

German Gutierrez and Thomas Philippony

March 2018

https://www.brookings.edu/wp-content/uploads/2017/09/gutierrezappendixfa17bpea.pdf

 

 

 

 

WP 18-4 Slower Productivity and Higher Inequality: Are They Related?

Jason Furman and Peter Orszag

June 2018

PIIE

https://piie.com/system/files/documents/wp18-4.pdf

 

 

 

 

THE FUTURE OF PRODUCTIVITY

OECD

2015

 

https://www.oecd.org/eco/OECD-2015-The-future-of-productivity-book.pdf

 

 

 

 

OECD Study on the Future of Productivity

Video

PIIE

 

 

 

 

 

A productivity perspective on the future of growth

By James Manyika, Jaana Remes, and Jonathan Woetzel
McKinsey
2014

https://www.mckinsey.com/featured-insights/employment-and-growth/a-productivity-perspective-on-the-future-of-growth

 

 

 

 

The future of productivity in manufacturing

Anne Green, Terence Hogarth, Erika Kispeter, David Owen

Peter Glover

February 2016

https://warwick.ac.uk/fac/soc/ier/research/strategic_lmi/ier_2016_manufacturing_sector_productivity_report.pdf

 

 

 

 

THE PRODUCTIVITY OUTLOOK: PESSIMISTS VERSUS OPTIMISTS

August 2016

Zia Qureshi
at the Brookings Institution
https://www.brookings.edu/wp-content/uploads/2016/08/productivity-outlook.pdf

 

 

 

The Slowdown in Productivity Growth: A View from International Trade

Development Issues No. 11

UN

April 2017

https://www.un.org/development/desa/dped/wp-content/uploads/sites/45/publication/dsp_policy_11.pdf

 

 

 

 

Five Puzzles in the Behavior of Productivity, Investment, and Innovation

Robert J. Gordon

NBER

August 2004

http://www.nber.org/papers/w10660

 

 

 

 

AN OECD AGENDA ON ISSUES IN PRODUCTIVITY MEASUREMENT

Paul Schreyer

OECD Statistics Directorate
2016 World KLEMS Conference
Madrid, May 23-24 2016

http://www.worldklems.net/conferences/worldklems2016/worldklems2016_Schreyer_slides.pdf

 

 

 

THE FUTURE OF PRODUCTIVITY

Chiara Criscuolo
Directorate for Science, Technology and Innovation OECD

Understanding the Great recession: from micro to macro
Bank of England
London | 24 September 2015

https://www.ifs.org.uk/uploads/Presentations/Understanding%20the%20recession_230915/CCriscuolo.pdf

 

 

 

 

 

Industry 4.0

The future of Productivity and Growth in Manufacturing Industries

BCG

https://www.zvw.de/media.media.72e472fb-1698-4a15-8858-344351c8902f.original.pdf

 

 

 

 

The waning of productivity growth

Raymond Van der Putten

http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=29178

 

 

The Impact of Robots on Productivity, Employment and Jobs

A positioning paper by the International Federation of Robotics

April 2017

https://ifr.org/img/office/IFR_The_Impact_of_Robots_on_Employment.pdf

 

 

 

 

The fall in productivity growth: causes and implications

Speech given by Silvana Tenreyro, External MPC Member, Bank of England

Peston Lecture Theatre, Queen Mary University of London

15 January 2018

https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/the-fall-in-productivity-growth-causes-and-implications

 

 

 

Artificial Intelligence, Automation, and the Economy

Science and Technology Council

Executive Office of the President

December 2016

https://www.whitehouse.gov/sites/whitehouse.gov/files/images/EMBARGOED%20AI%20Economy%20Report.pdf

 

 

 

 

Long-term growth and productivity projections in advanced countries

Gilbert Cette, Rémy Lecat & Carole Ly-Marin

Working Paper #617

December 2016

Bank of France

http://www.longtermproductivity.com/download/DT617.pdf

 

 

 

ARE WE APPROACHING AN ECONOMIC SINGULARITY?
INFORMATION TECHNOLOGY AND THE FUTURE OF ECONOMIC GROWTH

By
William D. Nordhaus

September 2015

https://cowles.yale.edu/sites/default/files/files/pub/d20/d2021.pdf

 

 

 

Challenges for the Future of Chinese Economic Growth

Jane Haltmaier

Federal Reseve Bank USA

2013

https://www.federalreserve.gov/pubs/ifdp/2013/1072/ifdp1072.pdf

 

 

 

Innovation, research and the UK’s productivity crisis.

Richard Jones

SPERI Paper No. 28

http://speri.dept.shef.ac.uk/wp-content/uploads/2016/04/SPERI-Paper-28-Innovation-research-and-the-UK-productivity-crisis.pdf

 

 

 

Think Like an Enterprise: Why Nations Need Comprehensive Productivity Strategies

BY ROBERT D. ATKINSON

MAY 2016

http://www2.itif.org/2016-think-like-an-enterprise.pdf

 

 

 

Solving the productivity puzzle

By Jaana Remes, James Manyika, Jacques Bughin, Jonathan Woetzel, Jan Mischke, and Mekala Krishnan

McKinsey

Feb 2018

https://www.mckinsey.com/featured-insights/meeting-societys-expectations/solving-the-productivity-puzzle

 

 

 

Solving the productivity puzzle: the role of demand and the promise of digitization

DR. JAN MISCHKE

McKinsey Global Institute

May 2018

http://bruegel.org/wp-content/uploads/2018/05/20180523-MGI_Solving-the-productivity-puzzle_Bruegel.pdf

 

 

Worried about Concentration? Then Worry about Rent-Seeking

By Brink Lindsey and Steven Teles
This article appeared on ProMarket on April 18, 2017.

 

https://www.cato.org/publications/commentary/worried-about-concentration-then-worry-about-rent-seeking

 

 

 

Online platforms, distortion of markets, social impacts and freedom of expression

Oxford Centre for Competition law and policy

22 May 2017

Tim Cowen.

https://www.iicom.org/images/iic/events/regional-local/Europe/20Sep2017/Tim_Cowen_Oxford_Centre_for_Competition_Law_and_Policy_speech_22May2017—updated-21.09.2017.pdf

 

 

 

What’s Behind the Increase in Inequality?

By Eileen Appelbaum*

September 2017

http://cepr.net/images/stories/reports/whats-behind-the-increase-in-inequality-2017-09.pdf

 

 

 

A NATIONAL COMPETITION POLICY: UNPACKING THE PROBLEM OF DECLINING COMPETITION AND SETTING PRIORITIES MOVING FORWARD

American Antitrust Institute

September 28, 2016

http://www.antitrustinstitute.org/sites/default/files/AAINatlCompPolicy.pdf

 

 

 

AI and the Economy

Jason Furman
Harvard Kennedy School
Cambridge, MA

Robert Seamans
NYU Stern School of Business
New York, NY

29 May 2018

http://www.nber.org/chapters/c14099.pdf

 

 

 

The United States and Europe: Short-Run Divergence and Long-Run Challenges

Jason Furman
Chairman, Council of Economic Advisers

Remarks at Bruegel
Brussels, Belgium
May 11, 2016

http://bruegel.org/wp-content/uploads/2016/05/The-United-States-and-Europe-Short-Run-Divergence-and-Long-Run-Challenges-Jason-Furman.pdf

 

 

 

 

Business Investment Spending Slowdown

April 9, 2018

Marc Labonte

CRS Insights

https://fas.org/sgp/crs/misc/IN10882.pdf

 

 

 

 

ECONOMIC REPORT OF THE PRESIDENT

Together With
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS

Feb 2016

https://www.gpo.gov/fdsys/pkg/ERP-2016/pdf/ERP-2016.pdf

 

 

Keynote Remarks of Commissioner Terrell McSweeny

Washington Center for Equitable Growth

Making Antitrust Work for the 21st Century

Washington, DC

October 6, 2016
https://www.ftc.gov/system/files/documents/public_statements/988713/mcsweeny_-_keynote_remarks_at_equitable_growth_10-6-16.pdf

 

 

Wal-Mart: A Progressive Success Story

Jason Furman

November 28, 2005

https://www.mackinac.org/archives/2006/walmart.pdf

 

 

“America Without Entrepreneurs: The Consequences of Dwindling Startup Activity”

Testimony before
The Committee on Small Business and Entrepreneurship
United States Senate
June 29, 2016

John W. Lettieri
Cofounder
& Senior Director for Policy and Strategy
Economic Innovation Group

https://www.sbc.senate.gov/public/_cache/files/0/d/0d8d1a51-ee1d-4f83-b740-515e46e861dc/7F75741C1A2E6182E1A5D21B61D278F3.lettieri-testimony.pdf

 

 

 

 

A reading list on market power, superstar firms, and inequality

BLOG

http://www.beyondthetimes.com/2017/08/16/a-partial-reading-list-on-market-power-superstar-firms-and-inequality/

 

 

 

 

 

Productivity Growth in the Advanced Economies:The Past, the Present, and Lessons for the Futures

Jason Furman

Chairman, Council of Economic Advisers

July 2015

https://obamawhitehouse.archives.gov/sites/default/files/docs/20150709_productivity_advanced_economies_piie_slides.pdf

 

 

 

 

 

Forms and sources of inequality in the United States

Jason Furman

17 March 2016

VOXEU

 

https://voxeu.org/article/forms-and-sources-inequality-united-states

 

 

 

 

Business Investment in the United States: Facts, Explanations, Puzzles, and Policies

Jason Furman
Chairman, Council of Economic Advisers
Progressive Policy Ins9tute

September 30, 2015

http://www.progressivepolicy.org/wp-content/uploads/2015/09/2015.09.30-Jason-Furman_Business-Investment-in-US-Facts-Explanations-Puzzles-Policies.pdf

 

 

 

 

Can Tax Reform Get Us to 3 Percent Growth?

Jason Furman
Harvard Kennedy School & Peterson Institute for International Economics

New York, NY
November 3, 2017

https://piie.com/system/files/documents/furman20171103ppt.pdf

 

 

 

 

Structural Challenges and Opportunities in the U.S. Economy

Jason Furman
Chairman, Council of Economic Advisers

London School of Economics
November 5, 2014

http://www.lse.ac.uk/assets/richmedia/channels/publicLecturesAndEvents/transcripts/20141105_1830_structuralOpportunitiesUSEconomy_tr.pdf

 

 

Is This Time Different? The Opportunities and Challenges of Artificial Intelligence

Jason Furman
Chairman, Council of Economic Advisers

Remarks at AI Now: The Social and Economic Implications of Artificial Intelligence Technologies in the Near Term
New York University
New York, NY

July 7, 2016

https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160707_cea_ai_furman.pdf

 

 

 

 

Rebalancing the U.S. Economy

Jason Furman

http://www.international-economy.com/TIE_Sp15_Furman.pdf

 

 

 

 

Should Policymakers Care Whether Inequality Is Helpful or Harmful For Growth?

Jason Furman

Harvard Kennedy School & Peterson Institute for International Economics
Rethinking Macroeconomic Conference, October 11-12 2017

Preliminary Draft: October 5, 2017

https://piie.com/system/files/documents/furman20171012paper.pdf

 

 

 

 

 

A Political Economy of Oligarchy: Winner-take-all ideology, superstar norms, and the rise of the 1%

Yochai Benkler

September, 2017

http://www.benkler.org/Political%20economy%20of%20oligarchy%2001.pdf

 

 

 

 

Can Trump Overcome Secular Stagnation?
Part One: The Demand Side *

James K. Galbraith

http://www.insightweb.it/web/files/can_trump_overcome_secular_stagnation.pdf

 

 

 

 

The macroeconomic effects of the 2017 tax reform

Robert J. Barro, Harvard University
Jason Furman, Harvard University

March 2018

https://www.brookings.edu/wp-content/uploads/2018/03/4_barrofurman.pdf

 

 

 

 

A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY

McKinsey Global Institute

January 2017

https://www.mckinsey.com/~/media/mckinsey/featured%20insights/Digital%20Disruption/Harnessing%20automation%20for%20a%20future%20that%20works/A-future-that-works-Executive-summary-MGI-January-2017.ashx

 

 

 

A MISSING LINK: THE ROLE OF ANTITRUST LAW IN RECTIFYING EMPLOYER POWER IN OUR HIGH-PROFIT, LOW-WAGE ECONOMY

ISSUE BRIEF BY MARSHALL STEINBAUM

APRIL 2018

http://rooseveltinstitute.org/wp-content/uploads/2018/04/Monopsony-issue-brief.pdf

 

 

 

Inclusive Growth

For once, some good news

by jason furman

https://assets1b.milkeninstitute.org/assets/Publication/MIReview/PDF/16-29-MR64.pdf

 

 

 

 

The Outlook for the U.S. Economy and the Policies of the New President

Jason Furman
Senior Fellow, PIIE
Peterson Institute for International Economics |

SNS/SHOF Finance Panel

Stockholm

June 12, 2017

https://www.sns.se/wp-content/uploads/2017/06/furman20170612ppt.pdf

 

 

 

 

The Role of Economists in Economic Policymaking

Jason Furman
Senior Fellow, Peterson Institute for International Economics

Arnold C. Harberger Distinguished Lecture on Economic Development
UCLA Burkle Center for International Relations
Los Angeles, CA

April 27, 2017

http://www.washingtonspeakers.com/images/pdfs/furman20170427.pdf

 

 

 

 

Market Concentration – Note by the United States

Hearing on Market Concentration
7 June 2018

OECD

https://www.ftc.gov/system/files/attachments/us-submissions-oecd-other-international-competition-fora/market_concentration_united_states.pdf

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)59&docLanguage=En

 

 

 

 

The fringe economic theory that might get traction in the 2016 campaign

 

https://www.washingtonpost.com/news/wonk/wp/2015/03/02/the-fringe-economic-theory-that-might-get-traction-in-the-2016-campaign/?noredirect=on&utm_term=.77c5e3479485

 

 

 

ACHIEVING INCLUSIVE GROWTH IN THE FACE OF DIGITAL TRANSFORMATION AND THE FUTURE OF WORK

OECD

https://www.g20.org/sites/default/files/documentos_producidos/achieving_inclusive_growth_in_the_face_of_digital_transformation_and_the_future_of_work_oecd_0.pdf

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Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

 

Since my last posts in August/September 2017 on the subject of

  • Market Concentration
  • Inequality
  • Market Power
  • Reduced Competition
  • Reduced Dynamism
  • Rising Profits
  • Declining Business Investments

several new studies have been published.  In addition, several important hearings and conferences have been organized by OECD, Brookings Institution, Boston University School of Law. Please see my list of references for details of each one of them.

This topic now is getting good attention in media also.

The Peterson Institute for International Economics (PIIE) held a major research conference on the “Policy Implications of Sustained Low Productivity Growth” on November 9, 2017. Jeromin Zettelmeyer, PIIE, moderates panel 4, “Wages and Inequality.” Presenters include Jason Furman, Harvard University and PIIE, and Lawrence H. Summers, Harvard University.  I have given the link to Video of the session 4 in the references.

OECD on June 7-8, 2018 held hearings on Market Concentration at Paris, France.  Several presentations were given by experts in the field.  I have given link to the conference webpage in the references.

The Hamilton Project/Brookings Institution had a Conference on June 13, 2018 in Washington DC on the subject of Market Concentration.  Please see the link to the conference video and papers in the references below.

 

 

From The State of Competition and Dynamism:
Facts about Concentration, Start-Ups, and Related Policies

concentration

From The State of Competition and Dynamism:
Facts about Concentration, Start-Ups, and Related Policies

 

concentration2concentration3concentration4concentration5

Please see my related posts:

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Low Interest Rates and Business Investments : Update August 2017

Increasing Returns, Path Dependence, Circular and Cumulative Causation in Economics

Increasing Returns and Path Dependence in Economics

Business Investments and Low Interest Rates

Mergers and Acquisitions – Long Term Trends and Waves

 

Key Sources of Research:

Building a More Dynamic and Competitive Economy

Hamilton Project

Brookings

June 13, 2018

http://www.hamiltonproject.org/events/building_a_more_dynamic_and_competitive_economy

Video of the Opening Remarks and Fireside Chat – Robert Rubin, Jason Furman, Steve Case

The State of Competition and Dynamism:
Facts about Concentration, Start-Ups, and Related Policies

 

Jay Shambaugh, Ryan Nunn, Audrey Breitwieser, and Patrick Liu

Brookings/Hamilton Project

June 2018

 

https://www.brookings.edu/wp-content/uploads/2018/06/ES_THP_20180611_CompetitionFacts_20180611.pdf

 

 

 

Market Concentration

OECD Hearing on Market Concentration

June 7-8, 2018

http://www.oecd.org/daf/competition/market-concentration.htm

 

 

 

Market Concentration Issues paper by the Secretariat

6-8 June 2018

OECD

 

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)46&docLanguage=En

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)67&docLanguage=En

 

 

 

Presented by the Business at OECD (BIAC) Competition Committee to the OECD Competition Committee

Market Concentration

June 7, 2018

 

http://biac.org/wp-content/uploads/2018/05/BIAC_CC_Market-Concentration_2018-05-22_FINAL1.pdf

 

 

 

 

 

Chapter VI

MARKET POWER AND INEQUALITY: THE REVENGE OF THE RENTIERS

Trade and Development Report 2017

UNCTAD

 

http://unctad.org/en/PublicationChapters/tdr2017ch6_en.pdf

 

 

The fall and rise of market power in Europe∗

John P. Wechea,b & Achim Wambacha

 

http://ftp.zew.de/pub/zew-docs/dp/dp18003.pdf

 

 

 

A policy at peace with itself: Antitrust remedies for our concentrated, uncompetitive economy

William A. Galston and Clara Hendrickson

2018

https://www.brookings.edu/research/a-policy-at-peace-with-itself-antitrust-remedies-for-our-concentrated-uncompetitive-economy/

 

 

 

 

The Rise of Market Power and the Macroeconomic Implications

Jan De Loecker, Jan Eeckhout

Issued in August 2017

http://www.nber.org/papers/w23687

 

 

 

 

This chart highlights the rise of corporate giants

WEF

2018

https://www.weforum.org/agenda/2018/06/chart-of-the-week-the-rise-of-corporate-giants

 

 

 

Market power in the U.S. economy today

 

https://equitablegrowth.org/market-power-in-the-u-s-economy-today/

 

 

 

Is Lack of Competition Strangling the U.S. Economy?

David Wessel

https://hbr.org/2018/03/is-lack-of-competition-strangling-the-u-s-economy

 

 

 

Competition Conference 2018

What’s the Evidence for Strengthening Competition Policy?

Boston University

July 2018

http://sites.bu.edu/tpri/news-and-events/competition-conference-2018/

 

 

 

Declining Competition and Investment in the U.S.

Germán Gutiérrez† and Thomas Philippon‡

November 2017

https://www.aeaweb.org/conference/2018/preliminary/paper/iDeysKkh

 

 

Should We Really Care About Inequality?

https://www.project-syndicate.org/videos/should-we-really-care-about-inequality

 

 

 

 

Beyond Antitrust: The Role of Competition Policy in Promoting Inclusive Growth

Jason Furman

Chairman, Council of Economic Advisers

Searle Center Conference on Antitrust Economics and Competition Policy Chicago, IL

September 16, 2016

 

https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160916_searle_conference_competition_furman_cea.pdf

 

 

POWERLESS: How Lax Antitrust and Concentrated Market Power
Rig the Economy Against American Workers, Consumers, and Communities

Roosvelt Institute

http://rooseveltinstitute.org/wp-content/uploads/2018/03/Powerless.pdf

 

 

 

Is Government the Problem or the Solution to U.S. Labor Market Challenges?

Jason Furman

2018

 

https://minneapolisfed.org/~/media/files/institute/conferences/2018-05/furman-slides.pdf?la=en

 

 

 

With Competition in Tatters, the Rip of Inequality widens

 

 

 

THE 2018 JOINT ECONOMIC REPORT

REPORT OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES

ON THE 2018 ECONOMIC REPORT OF THE PRESIDENT

 

https://www.congress.gov/115/crpt/hrpt596/CRPT-115hrpt596.pdf

 

 

 

 

Concentration not competition: the state of UK consumer markets

2017

 

http://www.smf.co.uk/wp-content/uploads/2017/10/Concentration-not-competition.pdf

 

 

 

CORPORATE RENT-SEEKING, MARKET POWER AND INEQUALITY:
TIME FOR A MULTILATERAL TRUST BUSTER?

UNCTAD

May 2018

 

http://unctad.org/en/PublicationsLibrary/presspb2018d3_en.pdf

 

 

 

America’s Superstar Companies Are a Drag on Growth

Lack of competition lets them gouge consumers, underpay workers and invest too little.

 

https://www.bloomberg.com/view/articles/2017-09-01/america-s-superstar-companies-are-a-drag-on-growth

 

 

 

Big Companies Are Getting a Chokehold on the Economy

Even Goldman Sachs is worried that they’re stifling competition, holding down wages and weighing on growth.

https://www.bloomberg.com/view/articles/2018-02-22/big-companies-gaining-monopoly-power-pose-risk-to-u-s-economy

 

 

 

Monopolies May Be Worse for Workers Than for Consumers

There isn’t much evidence that they raise prices, but they do seem to hold down wages.

https://www.bloomberg.com/view/articles/2017-12-29/monopolies-may-be-worse-for-workers-than-for-consumers

 

 

 

 

LABOR MARKET CONCENTRATION

José Azar
Ioana Marinescu Marshall I. Steinbaum

2017 December

 

http://www.nber.org/papers/w24147.pdf

 

 

 

 

More and more companies have monopoly power over workers’ wages. That’s killing the economy.

The trend can explain slow growth, “missing” workers, and stagnant salaries.

 

https://www.vox.com/the-big-idea/2018/4/6/17204808/wages-employers-workers-monopsony-growth-stagnation-inequality

 

Antitrust Remedies for Labor Market Power

Suresh Naidu

Eric A. Posner

E. Glen Weyl

 

Date Written: February 23, 2018

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3129221

 

 

Policy Implications of Sustained Low Productivity Growth – Panel 4

Jason Furman / Larry Summers

Peterson Institute for International Economics

November 2017

https://piie.com/events/policy-implications-sustained-low-productivity-growth

Presentation by jason Furman

https://piie.com/system/files/documents/4-1furman20171109ppt.pdf

Paper by Jason Furman – published June 2018

https://piie.com/system/files/documents/wp18-4.pdf

Panel 4 Video:

 

Wassily Leontief and Input Output Analysis in Economics

Wassily Leontief and Input Output Analysis in Economics

 

 

Wassily Leontief: The Concise Encyclopedia of Economics | Library of Economics and Liberty

From the time he was a young man growing up in Saint Petersburg, Wassily Leontief devoted his studies to input-output analysis. When he left Russia at the age of nineteen to begin the Ph.D. program at the University of Berlin, he had already shown how leon walras’s abstract equilibrium theory could be quantified. But it was not until many years later, in 1941, while a professor at Harvard, that Leontief calculated an input-output table for the American economy. It was this work, and later refinements of it, that earned Leontief the Nobel Prize in 1973.

Input-output analysis shows the extensive process by which inputs in one industry produce outputs for consumption or for input into another industry. The matrix devised by Leontief is often used to show the effect of a change in production of a final good on the demand for inputs. Take, for example, a 10 percent increase in the production of shoes. With the input-output table, one can estimate how much additional leather, labor, machinery, and other inputs will be required to increase shoe production.

Most economists are cautious in using the table because it assumes, to use the shoe example, that shoe production requires the inputs in the proportion they were used during the time period used to estimate the table. There’s the rub. Although the table is useful as a rough approximation of the inputs required, economists know from mountains of evidence that proportions are not fixed. Specifically, when the cost of one input rises, producers reduce their use of this input and substitute other inputs whose prices have not risen. If wage rates rise, for example, producers can substitute capital for labor and, by accepting more wasted materials, can even substitute raw materials for labor. That the input-output table is inflexible means that, if used literally to make predictions, it will necessarily give wrong answers.

At the time of Leontief’s first work with input-output analysis, all the required matrix algebra was done using hand-held calculators and sheer tenacity. Since then, computers have greatly simplified the process, and input-output analysis, now called “interindustry analysis,” is widely used. Leontief’s tables are commonly used by the World Bank, the United Nations, and the U.S. Department of Commerce.

Early on, input-output analysis was used to estimate the economy-wide impact of converting from war production to civilian production after World War II. It has also been used to understand the flow of trade between countries. Indeed, a 1954 article by Leontief shows, using input-output analysis, that U.S. exports were relatively labor intensive compared with U.S. imports. This was the opposite of what economists expected at the time, given the high level of U.S. wages and the relatively high amount of capital per worker in the United States. Leontief’s finding was termed the Leontief paradox. Since then, the paradox has been resolved. Economists have shown that in a country that produces more than two goods, the abundance of capital relative to labor does not imply that the capital intensity of its exports should exceed that of its imports.

Throughout his life Leontief campaigned against “theoretical assumptions and nonobserved facts” (the title of a speech he delivered while president of the American Economic Association, 1970–1971). According to Leontief too many economists were reluctant to “get their hands dirty” by working with raw empirical facts. To that end Wassily Leontief did much to make quantitative data more accessible, and more indispensable, to the study of economics.


Selected Works

1941. The Structure of American Economy, 1919–1929. Cambridge: Harvard University Press.

1966. Essays in Economics: Theories and Theorizing. New York: Oxford University Press.

 

From NY Times

Wassily Leontief, Economist Who Won a Nobel, Dies at 93

 

Wassily Leontief, who won the Nobel prize in economics in 1973 for his analyses of America’s production machinery, showing how changes in one sector of the economy can exact changes all along the line, affecting everything from the price of oil to the price of peanut butter, died Friday night at the New York University Medical Center. He was 93.

His analytic methods, as the Nobel committee observed, were adopted and became a permanent part of production planning and forecasting in scores of industrialized nations and in private corporations all over the world.

Following the model of his so-called input-output analysis, General Electric, for example, was able to load data from 184 sectors of the economy — such as energy, home construction and transportation — into a mammoth computer to help it predict how the energy crisis brought on by the Arab oil boycott in 1973 would affect public demand for its products and services, from light bulbs to turbines.

A well-known academic figure, Mr. Leontief was the director of the Institute for Economic Analysis of New York University from 1975 until 1991; even after his retirement he still taught at the university into his 90’s. Before coming to N.Y.U. he taught economics at Harvard for 44 years and directed large research projects there as well.

Mr. Leontief was a thinker who often complained that too many of his academic colleagues spent too much time staring out their office windows instead of being out in the field, as any good economist ought to be, counting things. ”Facts,” he said. ”You have to have facts. Theories aren’t good unless you have facts to back them.”

When asked how he developed the input-output analysis recognized by his Nobel memorial prize, he would invariably begin, ”Oh, it’s really very simple — what I wanted to do was collect facts.” The facts he sought were those that explained how segments of production were interconnected.

He showed that if you carefully studied changes in the cost and components of one type of product, you could determine the resulting changes in cost and components of others along the production chain.

Suppose you have a sudden rise the price of oil or steel? Mr. Leontief taught government officials and corporate executives to track how this influenced the costs of production in other segments of a local or national economy, both within an industry or more broadly across many industries and many nations.

Wassily Leontief was born Aug. 5, 1905, in St. Petersburg, the son of Wassily W. Leontief, an economist, and the former Eugenia Bekker. A brilliant student, he was allowed to enroll when he was only 15 at the newly renamed University of Leningrad. But he got in trouble by expressing vehement opposition to the lack of intellectual and personal freedom under the country’s Communist regime, which had taken power three years earlier. He was arrested as he was nailing up anti-Communist posters on the wall of a military barracks and placed in solitary confinement. Released after several days, he promptly resumed his anti-Communist activities and was arrested several more times.

Finally, in 1925, he was allowed to leave the country, a turn of fate he attributed to a growth on his neck. He said the authorities believed that the growth was cancerous and that he would die and be of no use to the state. He left Russia to resume his studies in economics at the University of Berlin, and his parents soon followed. The growth was benign and he completed his doctorate in 1929. He spent a year as an economist advising the Government of China, particularly on the planning of a new railroad network.

Then he came to the United States and worked briefly in New York at the National Bureau of Economic Research, where his published work quickly attracted attention, and Harvard invited him to join its economics faculty. He agreed, provided the university help him develop his ideas about production. Harvard gave him a research assistant and a $2,000 grant to develop the system of input-output analysis that the world was to adopt. He and his assistant began constructing a table covering 42 American industries, taking months to compile figures and perform calculations that computers would latter handle in fractions of seconds.

During the war, he helped the United States Government with planning for industrial production, worked as a consultant to the Office of Strategic Services and supervised compilation of a 92-economic-sector table for the Department of Labor. In 1948, Mr. Leontief set up the Harvard Research Project on the Structure of the American Economy with the aid of large grants from the Ford and Rockefeller Foundations and the Air Force to expand and refine his input-output models. Soon he had a staff of 20 — and a 650-punch-card computer from I.B.M., then the state-of-the art.

He did not, however, keep the Air Force grant long once the Eisenhower Administration came to power; some of its officials were critical of his input-output theory as smacking too much of a planned economy. That was precisely what he thought it should smack of.

One of his goals in studying the nature of changes in industrial production was to enable nations to plan in ways that would be economically beneficial and help them avoid periods of economic hardship. But to some economists the idea of national economic planning was ill advised: not only would it not work, they said, but it might make matters worse and also might open the door to excessive Government control. They maintained it would be better to let the private sector and the free market determine the course of future economic events.

To Mr. Leontief, it seemed short-sighted for nations to devote little or no thought to the analysis of the future of the overall economy, especially after what he regarded as the effective work of modern economists in devising projections that are mathematically and statistically sound. He spoke out often on the subject in the 1970’s and 80’s.

He and Leonard Woodcock, then president of the United Auto Workers, proposed that the Federal Government establish an Office of National Economic Planning to help coordinate economic projects and make recommendations on policies they said could avert unnecessary unemployment, inflation, failures in health care, shortages in affordable housing, energy, public transportation and other requirements of a civilized society.

The idea never materialized. If anything, the generation of younger economists who followed him, many of whom he taught, developed less respect for the abilities of national Governments to plan for the long term. It bothered him greatly that toward the end of the century many Americans seemed to have lost broad faith in their Government’s ability to improve the lot of its citizens, particularly through economic programs.

In an Op-Ed article in The New York Times in 1992, he said there was little doubt that the United States Government had played an important role in a generally prosperous economy for more than half the century, from ending the Great Depression in the 30’s to guiding the nation through most of the rest of the century in generally sounder economic health than most of the rest of the world.

Mr. Leontief was always fearful that employment problems would accompany widespread use of the high-speed computers that he himself relied on almost from the moment they first became applicable for nonmilitary purposes after World War II. He warned that computers would be for many workers what the tractor was to the horse — great for the farmer but not great for the horse.

In an interview in 1996, when he was 90, Mr. Leontief, noting the trend toward corporate downsizing, said: ”Individual entrepreneurs will continue to do better and better and better, but significant segments of the work force will do worse and worse. Ultimately, Governments will have to play a role in arbitrating and correcting this.”

Mr. Leontief seemed to grow more liberal with age. During the student protests on the Harvard campus in 1969, he split with most senior faculty members and joined with a younger group more sympathetic to the protesting students. In 1975, he resigned from Harvard, where he was the Henry Lee Professor of Economics and chairman of the university’s Society of Fellows, its most distinguished group of scholars. He left a year ahead of schedule, complaining that too often teachers at the graduate level did not teach and researchers did not do research.

Shortly before he resigned, he joined an internal report criticizing Harvard’s economics department, which had long been regarded as among the world’s best. The report said that the department had failed to adequately recruit minority faculty members, that it took an overly narrow approach in scholarship and that a ”deterioration in attitudes and relationships” had occurred.

At N.Y.U., he continued to expand his work on input-output analysis and helped foreign nations adopt it. China was among the last to do so, as it intensified its industrialization in the late 1980’s.

Wassily Leontief, a balletomane and connoisseur of fine wines, said he also thought of himself as a squire of Willoughby Brook in northern Vermont, where he and his family had a summer home. It was all very well to be an internationally regarded scholar, but landing a beautiful brook trout, he would say with his sly smile, was his passion.

He is survived by his wife, Estelle Helena Marks, a writer, whom he married in 1932, his daughter, Svetlana Alpers, the art historian, author, and professor of fine arts at the University of California at Berkeley, and two grandsons.

 

 

Please see my related posts

Classical roots of Interdependence in Economics

George Dantzig and History of Linear Programming

 

 

 

Key Sources of Research:

 

 

STRUCTURE OF THE WORLD ECONOMY

Outline of a Simple Input-Output Formulation*

Nobel Memorial Lecture, December 11, 1973
WASSILY LEONTIEF

 

https://pdfs.semanticscholar.org/22fa/b541e3fec34aa38c09c9eec41a46981e8fb9.pdf

https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1973/leontief-lecture.html

 

 

 

 

How is the global economy interconnected?

https://www.ubs.com/microsites/together/en/nobel-perspectives/laureates/wassily-leontief.html

 

 

 

 

Wassily Leontief

Concise Encyclopedia of Economics

Wassily Leontief

http://www.econlib.org/library/Enc/bios/Leontief.html

 

 

 

 

Wassily Leontief and the discovery of the input output approach,

Bjerkholt, Olav

(2016) :

Memorandum, Department of Economics, University of Oslo, No. 18/2016

https://www.econstor.eu/bitstream/10419/165961/1/877412162.pdf

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2884686

 

 

 

Wassily Leontief and Léon Walras: The Production as a Circular Flow

 

Amanar AKHABBAR*
Jérôme LALLEMENT

2011

https://www.researchgate.net/profile/Amanar_Akhabbar/publication/228703224_Wassily_Leontief_and_Leon_Walras_the_Production_as_a_Circular_Flow/links/00b4953c78c8214e41000000/Wassily-Leontief-and-Leon-Walras-the-Production-as-a-Circular-Flow.pdf

https://mpra.ub.uni-muenchen.de/30207/1/MPRA_paper_30207.pdf

 

 

 

Wassily Leontief, the Input-Output model, the Soviet National Economic Balance
and the General Equilibrium Theory

Fidel Aroche

 

https://www.unizar.es/jornadasiozaragoza/archivos/pdf/Ponencia_Aroche_Fidel_1.pdf

 

 

 

 

Wassily Leontief: In appreciation

William J. Baumol and Thijs ten Raa

Euro. J. History of Economic Thought 16:3 511–522

September 2009

 

http://thijstenraa.nl/leontief%20ejhet.pdf

http://www.wassily.leontief.net/Thijs.pdf

 

 

 

 

Social Technology and Political Economy:  The debate about the Soviet origins of Input Output Analysis

Amanar Akhabbar

2006

https://economix.fr/uploads/source/doc/journees/hpe/2006-12-21_Akhabbar.pdf

 

 

 

 

 

The National Accounts as a Tool for Analysis and Policy; History, Economic
Theory and Data Compilation Issues

Frits Bos
2009

https://mpra.ub.uni-muenchen.de/23582/1/MPRA_paper_23582.pdf

https://www.researchgate.net/profile/Frits_Bos/publication/46444816_The_National_Accounts_as_a_Tool_for_Analysis_and_Policy_History_Economic_Theory_and_Compilation_Issues/links/02e7e5281e2be982f3000000/The-National-Accounts-as-a-Tool-for-Analysis-and-Policy-History-Economic-Theory-and-Compilation-Issues.pdf

 

 

 

 

The national accounts as a tool for analysis and policy; past, present and
future

Frits Bos

CPB Netherlands Bureau for Economic Policy Analysis
2006

https://mpra.ub.uni-muenchen.de/1235/1/MPRA_paper_1235.pdf

 

 

 

 

Three centuries of macro-economic statistics

Frits Bos

December 2011

https://mpra.ub.uni-muenchen.de/35391/1/MPRA_paper_35391.pdf

 

 

 

 

Wassily Leontief and His Contributions to Economic Accounting

BEA

1999

https://www.bea.gov/scb/pdf/NATIONAL/Inputout/1999/0399leon.pdf

 

 

 

 

A Review of Input-Output Analysis

CARL F. CHRiST

Volume Title: Input-Output Analysis: An Appraisal
Volume ISBN: 0-870-14173-2

http://www.nber.org/chapters/c2866.pdf

 

 

STRUCTURE OF THE WORLD ECONOMY
Outline of a Simple Input-Output Formulation

Nobel Memorial Lecture, December 11, 1973
by
WA S S I L Y LE O N T I E F

Harvard University, Cambridge, Massachusetts, USA.

https://pdfs.semanticscholar.org/22fa/b541e3fec34aa38c09c9eec41a46981e8fb9.pdf

 

 

 

 

 

THE INPUT-OUTPUT MODELING APPROACH TO THE NATIONAL
ECONOMY

Viorel GAFTEA

http://www.ipe.ro/rjef/rjef2_13/rjef2_2013p211-222.pdf

 

 

 

 

“Input-Output Analysis in an Increasingly Globalised World:
Applications of OECD’s Harmonised International Tables”,

 

Wixted, B., N. Yamano and C. Webb

(2006),

OECD Science, Technology and Industry Working Papers,
2006/07, OECD Publishing

http://ledsgp.org/wp-content/uploads/2015/10/input-output-analysis.pdf

 

 

 

 

 

System Dynamics and Input Output Analysis

Charles Braden

https://www.systemdynamics.org/assets/conferences/1981/proceed/brade166.pdf

 

 

 

 

ECONOMIC INTERDEPENDENCE AND INPUT-OUTPUT THEORY

Ángel Luis Ruiz
Inter American University of Puerto Rico
Pedro F. Pellet
Nova Southeastern University

 

http://kalathos.metro.inter.edu/kalathos_mag/publications/archivo5_vol5_no2.pdf

 

 

 

Leontief and the Future of the World Economy

Emilio Fontela

Catedrático Emérito

Universidad de Ginebra

2002

https://www.uam.es/otroscentros/klein/stone/fiirs/cuadernos/pdf/FIIRS006.PDF

 

 

 

Classical’ Roots of Input-Output Analysis: A Short Account of its Long Prehistory

By Heinz D. Kurz and Neri Salvadori

 

https://www.iioa.org/conferences/13th/files/Kurz&Salvarodi_IOsClassicalRoots.pdf

 

 

 

 

EDITORIAL: CARBON FOOTPRINT AND INPUT–OUTPUT ANALYSIS – AN INTRODUCTION,

Thomas Wiedmann

(2009)

Economic Systems Research, 21:3, 175-186

http://folk.ntnu.no/daniemor/pdf/Wiedman2009_Carbon_footprint_MRIO_introduction_ESR.pdf

 

 

 

Introduction: the History of Input–Output Analysis, Leontief’s Path and
Alternative Tracks

OLAV BJERKHOLT & HEINZ D. KURZ

Economic Systems Research
Vol. 18, No. 4, 331–333, December 2006

https://static.uni-graz.at/fileadmin/_Persoenliche_Webseite/kurz_heinz/Dokumente/2006_The_History_of_Input_Output_Analysis__Leonthiefs_Path_and_Alternative_Tracks__in_Economic_Systems_Research_.pdf

 

 

 

 

Sraffa, Leontief, Lange: The political economy of input–output economics

 

2017

https://www.sciencedirect.com/science/article/pii/S1517758016301035

 

 

 

 

 

Credit Chains and Production Networks

Credit Chains and Production Networks

There are three kind of flows in a Supply Chain

  • Goods
  • Information
  • Financial

 

Credit Terms in a Supplier Buyer contracts determine payment delays which accumulate in current accounts of a Firm.

  • Account Receivables
  • Account Payables

 

Credit Relations

  • Bank to Bank
  • Bank to Firm
  • Firm to Firm

Dyad of Credit Relations

  • Supplier – Buyer

 

Triad of Credit Relations

  • Supplier – Bank – Buyer

Sources of Systemic Risk

  • Failure of a Firm and its impact on Suppliers and Customers (Flow of Goods)
  • Failure of a Bank and its impact on Trade Credit
  • Credit Contraction due to de-risking by the Banks
  • Decline in Correspondent Banking relations and its impact on Trade Finance

 

From Credit Chains and Sectoral Co-movement: Does the Use of Trade
Credit Amplify Sectoral Shocks?

Trade credit is an important source of short-term financing for firms, not only in the U.S., as documented by Petersen and Rajan (1997), but also around the World. For instance, accounts payables are larger than short-term debt in 60 percent of the countries covered by Worldscope. Also, across the world most firms simultaneously receive credit from their suppliers and grant it to their customers, which tend to be concentrated on specific sectors.  These characteristics of trade credit financing have led some authors to propose it as a mechanism for the propagation and amplification of idiosyncratic shocks. The intuition behind the mechanism is straightforward; a firm that faces a default by its customers may run into liquidity problems that force it to default to its own suppliers. Therefore, in a network of firms that borrow from each other, a temporary shock to the liquidity of some firms may cause a chain reaction in which other firms also get in financial difficulties, thus resulting in a large and persistent decline in aggregate activity. This idea was first formalized by Kiyotaki and Moore (1997) in a partial equilibrium setting, and has been recently extended to a general equilibrium environment by Cardoso-Lecourtois (2004), and Boissay (2006) who have also provided evidence of the potential quantitative importance of the mechanism by calibrating their models to the cases of Mexico and the U.S., respectively.

From Ontology of Bankruptcy Diffusion through Trade Credit
Channel

A supply network is a network of entities interacting to transform raw material into finished product for customers. Since interdependencies among supply network members on material, information, and finance are becoming increasingly intensive, financial status of one firm not only depends on its own management, but also on the performance and behaviours of other members. Therefore, understanding the financial flows variability and the material interactions is a key to quantify the risk of a firm. Due to the complex structure and dynamic interactions of modern supply networks, there are some difficulties faced by pure analysis approaches in analyzing financial status of the supply network members and the high degree of nonlinear interactions between them. Mathematical and operation research models usually do not function very well for this kind of financial decision making. These models always start with many assumptions and have difficulties modeling such complex systems that include many entities, relationships, features, parameters, and constraints. In addition, traditional modeling and analysis tools lack the ability to predict the impact of a specific event on the performance of the entire supply network.  Current financial data analysis with large volumes of structure data cannot offer the full picture and intrinsic insights into the risk nature of a company. Motivated by the literature gap in risk monitoring in investment background and limitations of analysis approaches for handling bankruptcy contagion phenomenon, we propose an ontological approach to present a formal, shared conceptualization of this domain knowledge.

From Inter-Firm Trade Finance in Times of Crisis

The severe recession that is hitting the global economy, with very low or even negative growth rates, has caused widespread contractions in international trade, both in developed and developing countries. World Trade Organization (WTO) has forecast that exports will decline by roughly 9% in volume terms in 2009 due to the collapse in global demand brought on by the biggest economic downturn in decades. The contraction in developed countries will be particularly severe with exports falling by 10%. In developing countries, which account for one-third of world trade, exports will shrink by some 2% to 3% in 2009.

The contraction in international trade has been accompanied by a sharp decline in the availability of trade finance. This decline is only partly explained by the contraction in demand: according to a BAFT (Banker’s Association for Trade and Finance) and International Monetary Fund (IMF) joint survey (2009), flows of trade finance to developed countries have fallen by 6% relative to the previous year, more than the reduction in trade flows, suggesting that part of the fall reflects a disruption of financial intermediation. The contraction in value of trade finance has also been accompanied by a sharp increase in its price. Fear that the decline in trade finance and the increase in its cost would accelerate the slowdown of world trade has triggered a number of government initiatives in support of trade finance (Chauffour and Farole,2009).

The situation is especially worrisome for firms operating in developing countries which rely heavily on trade finance to support both their exports and imports.1 With a restricted access to financing and an increased cost of financing, these firms may find difficulties in maintaining their production and trade activities.

 

Please see my related posts:

Supply Chain Finance (SCF) / Financial Supply Chain Management (F-SCM)

Production Chain Length and Boundary Crossings in Global Value Chains

Intra Industry Trade and International Production and Distribution Networks

Understanding Trade in Intermediate Goods

Trends in Intra Firm Trade of USA

Production and Distribution Planning : Strategic, Global, and Integrated

Development of Global Trade and Production Accounts: UN SEIGA Initiative

The Dollar Shortage, Again! in International Wholesale Money Markets

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

The Collapse of Global Trade during Global Financial Crisis of 2008-2009

Understanding Global Value Chains – G20/OECD/WB Initiative

Economics of Trade Finance

Balance Sheets, Financial Interconnectedness, and Financial Stability – G20 Data Gaps Initiative

Oscillations and Amplifications in Demand-Supply Network Chains

Contagion in Financial (Balance sheets) Networks

 

Key Sources of Research:

 

LIQUIDITY, BUSINESS CYCLES, AND MONETARY POLICY

Nobuhiro Kiyotaki
London School of Economics

John Moore
Edinburgh University and London School of Economics

27 November 2001

https://www.imf.org/external/np/seminars/eng/2008/fincycl/pdf/kimo.pdf

 

 

Credit Cycles

Nobuhiro Kiyotaki; John Moore

The Journal of Political Economy, Vol. 105, No. 2.

(Apr., 1997),

http://www.nviegi.net/teaching/master/km.pdf

 

Credit chains

Nobuhiro Kiyotaki (Princeton University)

John Moore (University of Edinburgh)

Date January 1997

http://www.econ.ed.ac.uk/papers/id118_esedps.pdf

https://www.minneapolisfed.org/research/conferences/research-events—conferences-and-programs/~/media/files/research/events/1997_01-31/Kiyotaki_CreditChains.pdf

 

 

Credit and Business Cycles

N Kiyotaki

1998

https://www.princeton.edu/~kiyotaki/papers/Credit-and-BusinessCycles.pdf

 

 

Inter-Enterprise Credit and Adjustment  During Financial Crises: The Role of Firm Size

Fabrizio Coricelli

Marco Frigerio

July, 2 2016

https://cepr.org/sites/default/files/Coricelli%2C%20Fabrizio%20paper.pdf

 

 

Credit chains and bankruptcy propagation in production networks

Stefano Battiston, Domenico Delli Gatti, Mauro Gallegati,
Bruce Greenwald, Joseph E. Stiglitz

2007

https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/2007_Credit_Chains.pdf

 

 

Trade Finance in Crisis : Market Adjustment or Market Failure ?

Jean-Pierre Chauffour

Thomas Farole

Date Written: July 1, 2009

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1437955

Resaleable debt and systemic risk

Jason Roderick Donaldson , Eva Micheler

2018

http://www.jrdonaldson.com/Papers/Donaldson-Micheler-Resaleable_Debt.pdf

 

Supply chains and credit-market shocks: Some implications for emerging markets,

Jinjarak, Yothin (2013)

ADBI Working Paper Series, No. 443

https://www.econstor.eu/bitstream/10419/101241/1/770887406.pdf

 

 

Financial Amplification Mechanisms and the Federal Reserve’s Supply of Liquidity during the Crisis

Asani Sarkar
Jeffrey Shrader

Staff Report no. 431
February 2010

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr431.pdf

 

 

Aggregate Fluctuations and the Role of Trade Credit

Lin Shao

2017

https://www.bankofcanada.ca/wp-content/uploads/2017/09/swp2017-37.pdf

 

 

Supply Chain Disruptions and Trade Credit

LU Yi OGURA Yoshiaki

TODO Yasuyuki ZHU Lianming

2017

https://www.rieti.go.jp/jp/publications/dp/17e054.pdf

 

 

Credit Shocks and Aggregate Fluctuations in  an Economy with Production Heterogeneity

Aubhik Khan

Julia K. Thomas

September 2013

https://www.aubhik-khan.net/KhanThomasDCTsept2013.pdf

 

 

Financial Frictions in Production Networks

Saki Bigio

Jennifer La’O

February 7, 2013

https://www0.gsb.columbia.edu/faculty/sbigio/papers/FinancialFrictionsNetworks.pdf

 

Working Paper No. 67, April 2016

http://perueconomics.org/wp-content/uploads/2014/01/WP-67.pdf

 

 

The Origins of Aggregate Fluctuations in a Credit Network Economy

Levent Altinoglu

October 16, 2016
http://blogs.bu.edu/levent/files/2015/10/Altinoglu_JMP_CurrentVersion.pdf

September 30, 2015

https://pdfs.semanticscholar.org/425a/fcb800d01a5b8dce9ed13a4a200bf51f6fed.pdf

 

Consolidated Bibliography

WTO

https://www.wto.org/english/res_e/booksp_e/aid4tradesupplychain13_biblio_e.pdf

 

 

Propagation of Financial Shocks in an Input-Output Economy with Trade and Financial Linkages of Firms

Shaowen Luo

December 4, 2015

http://www.economics.illinois.edu/seminars/documents/Luo.pdf

 

FDI, Trade Credit, and Transmission of Global Liquidity Shocks:
Evidence from Chinese Manufacturing Firms

Shu Lin and Haichun Ye

http://www.econ.cuhk.edu.hk/econ/images/content/news_event/seminars/2016-2017-2nd-semester/Lin–Ye_paper.pdf

 

 

Trade Credit, Financing Structure and Growth

Junjie Xia

October 27, 2016

http://www.junjiexia.com/uploads/7/6/7/2/76726065/jmp_oct16.pdf

 

The impact of corporate distress along the supply chain: evidences from United
States

Lucia Gibilaro

Gianluca Mattarocci

http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2017-Athens/papers/EFMA2017_0526_fullpaper.pdf

 

 

Does credit crunch investments down?
New evidence on the real eects of the bank-lending channel

Federico Cinganoz Francesco Manaresix Enrico Settex

December 2013

http://www.federicocingano.eu/Credit_crunch_investments.pdf

 

Interwoven Lending, Uncertainty, and Liquidity Hoarding

Adam Zawadowski

December 13, 2017

http://www.personal.ceu.hu/staff/Adam_Zawadowski/papers/credit.pdf

 

 

Trade credit: Elusive insurance of rm growth

DENNIS BAMS, JAAP BOS and MAGDALENA PISA*

October 5, 2016

http://www.research.mbs.ac.uk/accounting-finance/Portals/0/Users/002/02/2/Trade%20credit%20Elusive%20insurance%20of%20firm%20growth%202016.pdf

 

 

Chain Reactions, Trade Credit and the Business Cycle

Miguel Cardoso-Lecourtois

http://fmwww.bc.edu/RePEc/esNASM04/up.4593.1075462930.pdf

 

From production networks to geographical economics.

Gérard Weisbuch, Stefano Battiston.

Journal ofEconomic Behavior and Organization, Elsevier, 2007, 64 (3- 4), pp.448

https://hal.archives-ouvertes.fr/hal-00531863/document

 

 

Production networks and failure avalanches

Gerard Weisbuch
Stefano Battiston

March 5, 2018

https://arxiv.org/pdf/physics/0507101.pdf

 

 

Self-organised patterns in production networks

Gerard Weisbuch

October 10, 2005

http://www.lps.ens.fr/~weisbuch/gwcomplexus.pdf

 

 

Networks : Propagation of Shocks over Economic Networks

Daron Acemoglu

July 22, 2014.

https://economics.mit.edu/files/9790

 

 

Debt-Rank Analysis of Financial Distress Propagation on a Production Network in Japan

FUJIWARA Yoshi
University of Hyogo
TERAI Masaaki
RIKEN
FUJITA Yuji
Turnstone Research Institute, Inc.
SOUMA Wataru
Nihon University

https://www.rieti.go.jp/jp/publications/dp/16e046.pdf

 

 

Operational causes of bankruptcy propagation in supply chain

Zhongsheng Hua ⁎, Yanhong Sun 1, Xiaoyan Xu

2011

http://isiarticles.com/bundles/Article/pre/pdf/48280.pdf

 

 

Propagation of Financial Shocks in an Input-Output Economy with Trade and Financial Linkages of Firms

Shaowen Luo
September 20, 2015

http://www.econ.vt.edu/seminars/Seminar%20Papers/2016/10-02-15Luo.pdf

 

 

From Micro to Macro via Production Networks

Vasco M. Carvalho

http://www.crei.cat/wp-content/uploads/users/working-papers/carvalho_from_micro.pdf

 

 

Trade Credit and the  Propagation of Corporate Failure: An Empirical
Analysis

Tor Jacobson and Erik von Schedvin
August 2012

https://www.econstor.eu/bitstream/10419/81882/1/723939764.pdf

 

CREDIT MARKET DISRUPTIONS AND LIQUIDITY SPILLOVER EFFECTS IN THE SUPPLY CHAIN

Anna M. Costello

August 8, 2017

https://www.gsb.stanford.edu/sites/gsb/files/costello-anna-acctgcamp2017_0.pdf

 

Modeling defaults of companies in multi-stage supply chain networks

Kamil J.Mizgier, StephanM.Wagner,, JanuszA.Holyst

2010

http://mars.if.pw.edu.pl/~jholyst/Mizgier_etal_InPress_Modeling_defaults_of.pdf

 

 

 

The origins of scale-free production networks

Stanislao Gualdizand Antoine Mandelx

June 28, 2015

http://www.siecon.org/online/wp-content/uploads/2015/10/Gualdi.pdf

 

 

Optimization of order policies in supply networks

S. GÄottlich¤ M. Hertyy C. Ringhoferz

August 18, 2008

https://www.ki-net.umd.edu/pubs/files/FRG-2008-Ringhofer-Christian.FRG_Ringhofer_Orders080814.pdf

 

Financial Instability after Minsky: Heterogeneity, Agent Based Models and Credit
Networks

Domenico Delli Gatti

April 10, 2012

https://www.ineteconomics.org/uploads/papers/delli-gatti-domenico-berlin-paper.pdf

 

Measuring the Systemic Risk in Inter firm Transaction Networks

Makoto Hazama
And
Iichiro Uesugi

http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/28392/1/wp066.pdf

 

Systemic Risk Assessment in Complex Supply Networks

Anna Ledwoch, Alexandra Brintrup, J¨orn Mehnen, Ashutosh Tiwari

https://pure.strath.ac.uk/portal/files/66716085/Ledwoch_etal_SJ_2016_Systemic_risk_assessment_in_complex_supply_networks.pdf

 

TRADE CREDIT DEFAULTS AND LIQUIDITY PROVISION BY FIRMS

Reint Gropp
Frédéric Boissay

2007

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp753.pdf

 

The future of agent-based modelling.

Matteo Richiardi

Institute for New Economic Thinking and Nuffield College, Oxford, United Kingdom
Collegio Carlo Alberto, Moncalieri, Italy

This draft: June 2015

https://www.nuffield.ox.ac.uk/media/1702/abmfuture-v12.pdf

 

 

Financially Constrained Fluctuations in an Evolving Network Economy

Domenico Delli Gatti
Mauro Gallegati
Bruce Greenwald
Alberto Russo
Joseph E. Stiglitz

http://terna.to.it/ABM-BaF09/presentations/DelliGatti%28presentation%29_ABM.pdf

 

 

Credit Chains and Sectoral Comovement: Does the Use of Trade Credit Amplify Sectoral Shocks?

Claudio Raddatz

The World Bank
March, 2007

http://www.webmeets.com/files/papers/LACEA-LAMES/2007/335/Credit_chains_051707_withtables.pdf

 

 

Linkages and spillovers in global production networks: firm-level analysis of the Czech automotive industry

Petr Pavlinek

Pavla Žížalová

https://digitalcommons.unomaha.edu/cgi/viewcontent.cgi?article=1039&context=geoggeolfacpub

 

Ontology of Bankruptcy Diffusion through Trade Credit
Channel

Lin Cheng

Huaiqing Wang

Huaping Chen

https://50years.acs.org.au/content/dam/acs/50-years/journals/jrpit/JRPIT44.4.401.pdf

 

OPTIMAL ORDER AND DISTRIBUTION STRATEGIES IN PRODUCTION NETWORKS

Simone Gottlich, Michael Herty, and Christian Ringhofer

https://math.la.asu.edu/~chris/SpringerOpt10.pdf

 

Profitability, Trade Credit and Institutional Structure of Production

Michael Gofman
December 9, 2013

http://gofman.info/TC/Supplier-Customer%20Network.pdf

 

The Economics of Information and Financial
Networks

Stefano Battiston
July 22, 2016

https://simpolproject.eu/download/simpol-initiative-research/battiston2016information.pdf

 

Supply Chain Perspectives and Issues: A Literature Review

Albert Park
Gaurav Nayyar
Patrick Low

http://www.asiaglobalinstitute.hku.hk/en/wp-content/uploads/2016/06/supply-chain-perspectives-and-issues.pdf

 

 

LIAISONS DANGEREUSES: INCREASING CONNECTIVITY, RISK SHARING, AND SYSTEMIC RISK

Stefano Battiston
Domenico Delli Gatti
Mauro Gallegati
Bruce C. Greenwald
Joseph E. Stiglitz

http://www.nber.org/papers/w15611.pdf

 

 

Inter-Firm Trade Finance in Times of Crisis

Anna Maria C. Menichini

http://documents.worldbank.org/curated/en/649481468314087810/pdf/WPS5112.pdf

 

 

Reducing the Probability of Bankruptcy Through Supply Chain Coordination

Xiaoyan Xu, Yanhong Sun, and Zhongsheng Hua

2010

https://www.researchgate.net/profile/Yanhong_Sun5/publication/220508846_Reducing_the_Probability_of_Bankruptcy_Through_Supply_Chain_Coordination/links/573eac9d08ae298602e6e77a.pdf

 

 

Pathways towards instability in financial networks

Marco Bardoscia, Stefano Battiston Fabio Caccioli & Guido Caldarelli

2017

http://lims.ac.uk/wp-content/uploads/bardoscia2017pathways-1.pdf

 

 

International Credit Supply Shocks

Ambrogio Cesa-Bianchiy Andrea Ferreroz Alessandro Rebuccix

June 16, 2017

https://www.bostonfed.org/-/media/Documents/events/2017/boston-policy-workshop/AlessandroRebucci.pdf?la=en

 

Risk Propagation through Payment Distortion in Supply Chains

Alejandro Serrano

Rogelio Oliva

Santiago Kraiselburd

https://pdfs.semanticscholar.org/5b5f/0e6d7dc9d4b4f6bcada884b71562791404ed.pdf

 

 

Payment Defaults and Interfirm Liquidity Provision

https://academic.oup.com/rof/article-abstract/17/6/1853/1591419

 

SYSTEMIC RISK: A SURVEY

BY OLIVIER DE BANDT
AND PHILIPP HARTMANN

November 2000

https://www.econstor.eu/bitstream/10419/152469/1/ecbwp0035.pdf

 

 

Risk Propagation in Supply Chains

Alejandro Serrano

Rogelio Oliva

Santiago Kraiselburd

https://pdfs.semanticscholar.org/2db1/f3278ab2a75ff11b0142fba19a4cf223805a.pdf

 

 

How Inventory Is (Should Be) Financed: Trade Credit in Supply Chains with Demand
Uncertainty and Costs of Financial Distress

Song (Alex) Yang, John R. Birge

http://faculty.chicagobooth.edu/workshops/omscience/past/more/pdf/YangBirge_trade%20credit.pdf

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2746645

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1734682

 

 

The Supply Chain Effects of Bankruptcy

S. Alex Yang

John R. Birge, Rodney P. Parker

https://pdfs.semanticscholar.org/6efb/86a8667f24af2c6a5cd7eb52bbd12b39697b.pdf

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.715.5812&rep=rep1&type=pdf

 

Supply Chain Management: Supplier Financing Schemes and Inventory Strategies

Min Wang

https://www8.gsb.columbia.edu/programs/sites/programs/files/abstracts/Min_Wang_Dissertation.pdf

 

Foreign Investment and Supply Chains in Emerging Markets: Recurring Problems and Demonstrated Solutions

Theodore H. Moran

PIIE

2014

https://piie.com/publications/wp/wp14-12.pdf

 

Improving cash flow using credit management
The outline case

http://www.cimaglobal.com/Documents/ImportedDocuments/cid_improving_cashflow_using_credit_mgm_Apr09.pdf.pdf

 

CREDIT CHAINS AND THE PROPAGATION OF
FINANCIAL DISTRESS

2006

by Frederic Boissay

http://sdw.zentral-bank.eu/pub/pdf/scpwps/ecbwp573.pdf

 

Exposure to international crises: trade vs. financial contagion

Everett Grant

2016

https://www.esrb.europa.eu/pub/pdf/wp/esrbwp30.en.pdf?7b7cc950c1a2286d395ed8489bfde5c7

 

 

Credit Contagion and Trade Credit Supply:
Evidence from Small Business Data in Japan

TSURUTA Daisuke

https://www.rieti.go.jp/jp/publications/dp/07e043.pdf

 

 

The Price of Complexity in Financial Networks

Joseph Stiglitz

2017

https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/The%20Price%20of%20Complexity%20in%20Financial%20Networks.pdf

 

 

The Price of Complexity in Financial Networks

S. Battiston

2017

https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/risk/downloads/160913_slides_battison.pdf

 

 

 

Gantt Chart Simulation for Stock Flow Consistent Production Schedules

Gantt Chart Simulation for Stock Flow Consistent Production Schedules

 

I have knowledge of two software which do Gantt chart simulation for production scheduling.  These are used by top most companies in the world for production planning and scheduling now a days known as Supply Chain Management (SCM).

Production Schedules are stock flow consistent which means that starting inventories, and unused production of products result in cumulative inventory which is plotted for each of the product.

Production and Shipments (arrivals and dispatched) create Flows and Inventory levels indicate Stock level positions.

Gantt Chart simulators are excellent tools for operations management in plants.

The first Gantt chart was actually developed by Karol Adamiecki in Poland.  He called it a Harmonogram.  Henry Gantt in 1910 published first gantt chart which was later than publication by Karol Adamiecki.

These two charts below show Simulator window in which Gantt chart and inventory level plots are displayed.

Gantt Chart Simulator in Aspen Tech Plant Scheduler for Production Scheduling

active-guidance_10740930

 

Gantt Chart Simulator in Atlantic Decision Sciences Scheduler

Scheduling Board Single Chart

Key Sources for Research:

 

A Presentation by Chris Jones on Evolution of Graphical Production Scheduling Software

at the Cornell University Deptt of ORIE

 

 

 

Atlantic Decision Sciences

http://atlanticdecisionsciences.com

 

 

Aspen Technology

http://aspentech.com/products/aspen-plant-scheduler/

 

 

History of Gantt Chart

http://www.ganttchart.com/orgforwork.html

 

 

History of Production Scheduling

http://www.springer.com/cda/content/document/cda_downloaddocument/9780387331157-c1.pdf?SGWID=0-0-45-321351-p148129370

 

 

The harmonogram: an overlooked method of scheduling work.

Marsh, E. R. (1976).

Project Management Quarterly, 7(1), 21–25.

https://www.pmi.org/learning/library/harmonogram-overlooked-method-scheduling-work-5666

 

The Harmonogram of Karol Adamiecki

Edward R. Marsh

http://amj.aom.org/content/18/2/358

 

Karol Adamiecki

https://www.pocketbook.co.uk/blog/tag/karol-adamiecki/

Network Economics of Block Chain and Distributed Ledger Technology

Network Economics of Block Chain and Distributed Ledger Technology

 

Quadruple Accounting System

Morris Copeland, and Hyman Minsky emphasized quadruple entry accounting system envisioning interrelated interlocking balance sheets of economic agents.  Interlocking balance sheets create a network of economic agents.

I attach a slide from a presentation by Marc Lavoie given at Minsky Summer school in 2010 at the Levy Institute of Economics (Bard College).

 

Minsky

 

There are several FINTECH innovations which are bringing about dramatic changes in the financial services business.

  • Block Chain and Distributed Ledgers
  • Payment Banks
  • Retail P2P Payment services
  • Mobile Payments
  • Secured Wallets
  • Domestic Real Time Payments and Transfers
  • Cross Border Near Real time Money Transfers

 

Block Chain and Distributed Ledgers, in my opinion, are/can be implementation of quadruple accounting principles envisioned by Morris Copeland and Hyman Minsky.  Two economic agents engage in financial transactions which are recorded in distributed ledgers.

Some of the key components of distributed ledger technology are:

  • Peer-To-Peer Networking
  • Cryptography
  • Distributed Data Storage

In contrast with centralized ledgers, distributed ledgers store data at each node in the P2P network.  So there is no need for an intermediating institution.  From a payment system perspective, each node in the P2P network can be thought of as a bank.   Each node will have its own ledger and balance sheet which will record assets and liabilities.

Ripple is a Cross Border money transfer solution which is based on block chain technology.

 

Recent rise of retail P2P payment services such as

  • Xoom
  • M-Paisa
  • PayTM

indicates a trend toward real time payments/money transfers domestic and international.  This trend also indicates decoupling of these services from traditional deposit/lending banks. XOOM is a service provided by PAYPAL for international Money Transfers.  Money transfers are within a few minutes.

In USA, there are new P2P services offered to facilitate faster near real time payments/money transfers through mobile and online interfaces.

  • Venmo (Paypal)
  • Zelle (clearXchange Network)
  • Square Cash
  • Braintree (Paypal)

There are also social media payments available now through which consumers can quickly send money using social media applications such as

  • Facebook (through Messanger app)
  • Snapcash (through SnapChat)
  • Apple PayCash (through imessages app)
  • TenCent via WeChat

 

Rise of payment banks such as PayTM is one such example.  Reserve Bank of India has granted PayTM a payment bank status.  But transfers are still between bank accounts of transacting consumers where deposits are kept. Payment Bank acts as a technology provider and acts as an intermediary.

As per the RBI guidelines, payments banks cannot lend they can only take deposits or accept payments.

There are four payment banks in India now.

  • PayTM Payment Bank
  • Airtel Payment Bank
  • India Post Payment Bank
  • FINO Payment Bank

 

Mobile payments using secured wallets is another such example.

  • Consumer to Business payments and transfers
  • Consumer to Consumer payments and transfers
  • Google Wallet
  • Apple Pay
  • Android Pay
  • Alipay

 

Cross Border Payment Solutions:

  • XOOM
  • Earthport
  • TransferWise
  • RIPPLE
  • Remitly
  • WorldRemit

 

 

Please see my other related posts:

Next Generation of B2C Retail Payment Systems

Cross Border/Offshore Payment and Settlement Systems

 

 

Key sources of Research:

 

Minsky and Godley and financial Keynesianism

Marc Lavoie
University of Ottawa

2010

http://www.levyinstitute.org/pubs/conf_june10/Lavoie.pdf

 

Block Chain:  A Primer

2016

https://mpra.ub.uni-muenchen.de/76562/1/MPRA_paper_76562.pdf

 

Distributed Ledger Technologies/Blockchain: Challenges, opportunities and the prospects for standards

Advait Deshpande, Katherine Stewart, Louise Lepetit, Salil Gunashekar

2017

www2.caict.ac.cn/zscp/qqzkgz/qqzkgz_zdzsq/201708/P020170818579005375876.pdf

 

Banking on Distributed Ledger Technology: Can It Help Banks Address Financial Inclusion?

By Jesse Leigh Maniff and W. Blake Marsh

2017

https://www.kansascityfed.org/~/media/files/publicat/econrev/econrevarchive/2017/3q17maniffmarsh.pdf

 

 

Distributed ledger technology in payments, clearing, and settlement

Mills, David, Kathy Wang, Brendan Malone, Anjana Ravi, Jeff Marquardt, Clinton
Chen, Anton Badev, Timothy Brezinski, Linda Fahy, Kimberley Liao, Vanessa Kargenian,
Max Ellithorpe, Wendy Ng, and Maria Baird (2016).

Finance and Economics Discussion
Series 2016-095. Washington: Board of Governors of the Federal Reserve System,

2016

https://www.federalreserve.gov/econresdata/feds/2016/files/2016095pap.pdf

 

 

Distributed Ledger Technology: beyond block chain

A report by the UK Government Chief Scientific Adviser

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/492972/gs-16-1-distributed-ledger-technology.pdf

 

Bitcoin, Blockchain & distributed ledgers: Caught between promise and reality

Deloitte

https://www2.deloitte.com/content/dam/Deloitte/au/Images/infographics/au-deloitte-technology-bitcoin-blockchain-distributed-ledgers-180416.pdf

 

 

Distributed ledger technology in payment, clearing and settlement
An analytical framework

BIS

2017

https://www.bis.org/cpmi/publ/d157.pdf

 

 

The Truth About Blockchain

HBR
January–February 2017 Issue

 

https://hbr.org/2017/01/the-truth-about-blockchain

 

THE USE OF BLOCKCHAIN IN CLEARING AND SETTLEMENT

MARECHAL Baptiste

 

 

Peer-to-peer payments: Surveying a rapidly changing landscape

By Jennifer Windh

August 15, 2011

 

https://www.frbatlanta.org/-/media/documents/rprf/rprf_pubs/110815wp.pdf