Research Project Reports
Research Project Reports | February 2018Among the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.
The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.
The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.
Download:Associated Program(s):Author(s):Scott Fullwiler Stephanie A. Kelton Catherine Ruetschlin Marshall SteinbaumRelated Topic(s):
Research Project Reports | September 2015View More View Less
The Turkish Case
Produced in partnership with the International Labour Organization, United Nations Development Programme, and UN Women, this report examines the demand-side rationale for a public investment in the social care sector—specifically, early childhood care and preschool education (ECCPE)—by comparing its potential for job creation, pro-women allocation of jobs, and poverty reduction with an equivalent investment in the construction sector.
The authors find that a public investment of 20.7 billion TRY yields an estimated 290,000 new jobs in the construction sector and related sectors. However, an equal investment in ECCPE creates 719,000 new jobs in ECCPE and related sectors, or 2.5 times as many jobs. Furthermore, nearly three-quarters of the ECCPE jobs go to women, whereas a mere 6 percent of new jobs go to women following an expansion of the construction sector.
ECCPE expansion is also shown to be superior in terms of the number of decent jobs (i.e., jobs with social security benefits) created: some 85 percent of new ECCPE jobs come with social security benefits, compared to the slightly more than 30 percent of construction jobs that come with equivalent benefits. Both expansions are found to benefit the poor, with an ECCPE expansion targeting prime-working-age poor mothers of small children showing the potential to reduce the relative poverty rate by 1.14 percentage points. In terms of fiscal sustainability, an ECCPE expansion is estimated to recoup 77 percent of public expenditures through increased government revenues, while construction recovers roughly 52 percent.
The report concludes that in addition to supply-side effects, there is a robust demand-side rationale for expanded funding of ECCPE, with clear benefits in terms of decent employment creation, gender equality, poverty alleviation, and fiscal sustainability. These findings have important implications for expanded public investment in the broader social care sector as a strategy that embraces gender budgeting while promoting inclusive and sustainable growth.Download:Associated Program:Author(s):Related Topic(s):
Research Project Reports | May 2015View More View LessThis addendum to our June 2014 report, “Responding to the Unemployment Challenge: A Job Guarantee Proposal for Greece,” updates labor market data through 2014Q3 and identifies emerging employment and unemployment trends. The overarching aim of the report, the outcome of a study undertaken in 2013 by the Levy Institute in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour, is to provide policymakers and the general public research-based evidence of the macroeconomic and employment effects of a large-scale direct job creation program in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010 as a condition of the loans made to Greece by its eurozone partners.Download:Associated Program(s):Author(s):Related Topic(s):
Research Project Reports | April 2015This monograph is part of the Levy Institute’s Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis, a two-year project funded by the Ford Foundation.
This is the fourth in a series of reports summarizing the findings of the Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis, directed by Senior Scholar L. Randall Wray. This project explores alternative methods of providing a government safety net in times of crisis. In the global financial crisis that began in 2007, the United States used two primary responses: a stimulus package approved and budgeted by Congress, and a complex and unprecedented response by the Federal Reserve. The project examines the benefits and drawbacks of each method, focusing on questions of accountability, democratic governance and transparency, and mission consistency.
The project has also explored the possibility of reform that might place more responsibility for provision of a safety net on Congress, with a smaller role to be played by the Fed, enhancing accountability while allowing the Fed to focus more closely on its proper mission. Given the rise of shadow banking—a financial system that operates largely outside the reach of bank regulators and supervisors—the Fed faces a complicated problem. It might be necessary to reform finance, through downsizing and a return to what Hyman Minsky called “prudent banking,” before we can reform the Fed.
This report describes the overall scope of the project and summarizes key findings from the three previous reports, as well as additional research undertaken in 2014.Download:Associated Program:Related Topic(s):
Research Project Reports | August 2014
The Levy Institute Measure of Time and Income PovertyThis report presents findings from a joint project of the Levy Economics Institute and the Korea Employment Information Service, with the central objective of developing a measure of time and income poverty for Korea that takes into account household production (unpaid work) requirements. Standard measurements of poverty assume that all households have enough time to adequately attend to the needs of household members—including, for example, caring for children. But this assumption is false. For numerous reasons, some households may not have sufficient time, and they thus experience “time deficits.” If a household officially classified as nonpoor has such a time deficit and cannot afford to cover it by buying market substitutes (e.g., hiring a care provider), that household will encounter hardships not reflected in the official poverty measure.To get a more accurate calculus of poverty, we developed the Levy Institute Measure of Time and Income Poverty (LIMTIP), a two-dimensional measure that takes into account both the necessary income and the household production time needed to achieve a minimum living standard. In the case of Korea, our estimates for 2008 (the last year for which data are available) show that the LIMTIP poverty rate of employed households was almost three times higher than the official poverty rate (7.5 percent versus 2.6 percent). The gap between the official and LIMTIP poverty rates was notably higher for “nonemployed male head with employed spouse,” “single female-headed” and “dual-earner” households. Our estimates of the size of the hidden poor—roughly two million individuals—suggest that ignoring time deficits in household production resulted in a serious undercount of the working poor, which has profound consequences for the formulation of policy. In addition, the stark gender disparity in the incidence of time poverty among the employed, even after controlling for hours of employment, suggests that the source of the gender difference in time poverty lies in the greater share of the household production activities that women undertake. Overall, current policies to promote gender equality and economic well-being in Korea need to be reconsidered, based on a deeper understanding of the linkages between the functioning of labor markets, unpaid household production activities, and existing arrangements of social provisioning—including social care provisioning.Download:Associated Program(s):The Distribution of Income and Wealth Gender Equality and the Economy The Levy Institute Measure of Time and Income PovertyAuthor(s):Related Topic(s):
Research Project Reports | July 2014
A Proposal for Rural Reinvestment and Urban EntrepreneurshipThe crisis in Greece is persistent and ongoing. After six years of deepening recession, real GDP has shrunk by more than 25 percent, with total unemployment now standing at 27.2 percent. Clearly, reviving growth and creating jobs should be at the top of the policy agenda.
But banks remain undercapitalized, and lending has been restricted to only the most creditworthy businesses and households. Many start-ups and small- and medium-size enterprises (SMEs) have almost no access to development loans, and for those to whom credit can be extended, it is at disproportionally high interest rates.
The success of micro-lending institutions in developing nations (such as the Grameen Bank in Bangladesh) has highlighted the positive economic performance of community-based credit, and such lending models have proven to be an important poverty policy alternative in areas where transfer payments are limited. Community or co-operative financial institutions (CFIs) can fill the gap when existing institutions cannot adequately perform critical functions of the financial system for SMEs, entrepreneurs, and low-income residents seeking modest financing and other banking services.
We propose expanding the reach and services of CFIs within Greece, drawing upon lessons from the US experience of community development banking and various co-operative banking models in Europe. The primary goals of this nationwide system would be to make credit available, process payments, and offer savings opportunities to communities not well served by the major commercial Greek banks.
Our blueprint includes suggestions on the banks’ organization and a framework within which they would be chartered, regulated, and supervised by a newly created central co-operative bank. It also looks at the possible impact that such a network could have, especially in terms of start-ups, SMEs, and rural redevelopment (agrotourism)—all of which are critical to Greece’s exit from recession.Download:Associated Program:Author(s):Related Topic(s):
Research Project Reports | June 2014
This report presents the findings from a study undertaken by the Levy Institute in 2013 in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour. It uses as background the 2011 Levy Institute study “Direct Job Creation for Turbulent Times in Greece,” which focused on the need for direct job creation to address rising unemployment. The focus in this report, however, is different. Here, the aim is to make available to policymakers and the broader public research-based evidence of the macroeconomic and employment effects of a large-scale program of direct job creation program—a cost-effective and proven policy response. The ultimate goal of this undertaking is to draw urgently needed attention to the worsening levels of unemployment in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010.Download:Associated Program(s):Author(s):Related Topic(s):
Research Project Reports | May 2014
The Levy Institute Measure of Time and Consumption Poverty for Turkey
Official poverty lines in Turkey and other countries often ignore the fact that unpaid household production activities that contribute to the fulfillment of material needs and wants are essential for the household to reproduce itself as a unit. This omission has consequences. Taking household production for granted when measuring poverty yields an unacceptably incomplete picture, and therefore estimates based on such an omission provide inadequate guidance to policymakers.
Standard measurements of poverty assume that all households and individuals have enough time to adequately attend to the needs of household members—including, for example, children. These tasks are absolutely necessary for attaining a minimum standard of living. But this assumption is false. For numerous reasons, some households may not have sufficient time, and they thus experience what are referred to as “time deficits.” If a household officially classified as nonpoor has a time deficit and cannot afford to cover it by buying market substitutes (e.g., hire a care provider), that household will encounter hardships not reflected in the official poverty measure. To get a more accurate calculus of poverty, we have developed the Levy Institute Measure of Time and Consumption Poverty (LIMTCP), a two-dimensional measure that takes into account both the necessary consumption expenditures and household production time needed to achieve a minimum living standard.Download:Associated Program(s):Author(s):Related Topic(s):
Research Project Reports | April 2014This monograph is part of the Levy Institute’s Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis, a two-year project funded by the Ford Foundation.
This is the third in a series of reports examining the Federal Reserve Bank’s response to the global financial crisis, with particular emphasis on questions of accountability, democratic governance and transparency, and mission consistency. In this year’s report, we focus on issues of central bank independence and governance, with particular attention paid to challenges raised during periods of crisis. We trace the principal changes in governance of the Fed over its history—changes that accelerate during times of economic stress. We pay special attention to the famous 1951 “Accord” and to the growing consensus in recent years for substantial independence of the central bank from the treasury. In some respects, we deviate from conventional wisdom, arguing that the concept of independence is not usually well defined. While the Fed is substantially independent of day-to-day politics, it is not operationally independent of the Treasury. We examine in some detail an alternative view of monetary and fiscal operations. We conclude that the inexorable expansion of the Fed’s power and influence raises important questions concerning democratic governance that need to be resolved.Download:Associated Program:Author(s):
Research Project Reports | July 2013
Technical PaperIn this report Levy Institute President Dimitri B. Papadimitriou and Research Scholars Gennaro Zezza and Michalis Nikiforos present the technical structure of the Levy Institute's macroeconomic model for the Greek economy (LIMG). LIMG is a stock-flow consistent model that reflects the “New Cambridge” approach that builds on the work of Distinguished Scholar Wynne Godley and the current Levy Institute model for the US economy. LIMG is a flexible tool for the analysis of economic policy alternatives for the medium term and is also the analytic framework for a forthcoming Strategic Analysis series focusing on the Greek economy.Download:Associated Program:Author(s):Related Topic(s):
Research Project Reports | April 2013
The Lender of Last Resort: A Critical Analysis of the Federal Reserve’s Unprecedented Intervention after 2007View More View LessThis monograph is part of the Levy Institute’s Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis, a two-year project funded by the Ford Foundation.
“Never waste a crisis.” Those words were often invoked by reformers who wanted to tighten regulations and financial supervision in the aftermath of the global financial crisis that began in late 2007. Many of them have been disappointed, since the relatively weak reforms adopted (for example, in Dodd-Frank) appear to have fallen far short of what is needed. But the same words can be invoked in reference to the policy response to the crisis—that is, to the rescue of the financial system. To date, the crisis was wasted in that area, too. If anything, the crisis response largely restored the deeply flawed system that existed on the eve of the crisis.Download:Associated Program:Author(s):
Research Project Reports | December 2012
Revisiting Poverty Measurement, Informing Policy Responses
This report is published as part of the “Undoing Knots, Innovating for Change” series, issued by the United Nations Development Programme (UNDP) Regional Centre for Latin America and the Caribbean through its Gender Practice Area. It includes findings from a UNDP-supported research project undertaken in 2011 by the Levy Economics Institute with the objective of proposing an alternative to official income poverty measures, one that takes into account household production (unpaid work) requirements—an issue still largely ignored by official poverty estimates. This has significant consequences for policymaking. The resulting Levy Institute Measure of Time and Income Poverty is a two-dimensional measure that jointly tracks income gaps and time deficits. Using this alternative measure, the authors present selected results of empirical estimates of poverty and compare them with official income poverty rates for Argentina, Chile, and Mexico, with a focus on the study's policy implications.Download:Associated Program:Author(s):
Research Project Reports | October 2012
Interim ReportIn this interim report, we discuss the evolution of major macroeconomic variables for the Greek economy, focusing in particular on the sources of growth before and after the euro era, the causes and consequences of the continuing recession, and the likely results of the policies currently being implemented. Some preliminary suggestions for alternative policies are included. These alternatives will be tested in a more robust econometric framework in a subsequent report.
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Research Project Reports | August 2012
Implications for the Measurement of Poverty
Customarily, income poverty incidence is judged by the ability of individuals and households to gain access to some level of minimum income based on the premise that such access ensures the fulfillment of basic material needs. However, this approach neglects to take into account the necessary (unpaid) household production requirements without which basic needs cannot be fulfilled. In fact, the two are interdependent and evaluation of standards of living ought to consider both dimensions.
This report provides an analytical and empirical framework that includes unpaid household production work in the very conceptualization and calculations of poverty: the Levy Institute Measure of Time and Income Poverty (LIMTIP). Based on this new analytical framework, empirical estimates of poverty are presented and compared with those calculated according to the official income poverty lines for Argentina, Chile, and Mexico. In addition, an employment-generating poverty-reduction policy is simulated in each country, and the results are assessed using the official and LIMTIP poverty lines.
The undertaking of this work was initiated as a result of joint discussions and collaboration between the Levy Economics Institute and United Nations Development Programme Regional Service Centre for Latin America and the Caribbean, particularly the Gender Practice, Poverty, and Millennium Development Goals areas. It addresses an identified need to expand the knowledge base, conceptually, analytically, and empirically, on the links between (official) income poverty and the time allocation of households between paid and unpaid work.Download:Associated Program(s):The Levy Institute Measure of Time and Income Poverty The Distribution of Income and Wealth Gender Equality and the EconomyAuthor(s):Related Topic(s):
Research Project Reports | April 2012This monograph is part of the Institute’s research program on Financial Instability and the Reregulation of Financial Institutions and Markets, funded by the Ford Foundation. Its purpose is to investigate the causes and development of the recent financial crisis from the point of view of the late financial economist and Levy Distinguished Scholar Hyman Minsky, and to propose “a thorough, integrated approach to our economic problems.”
The monograph draws on Minsky’s work on financial regulation to assess the efficacy of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, enacted in response to the 2008 subprime crisis and subsequent deep recession. Some two years after its adoption, the implementation of Dodd-Frank is still far from complete. And despite the fact that a principal objective of this legislation was to remove the threat of taxpayer bailouts for banks deemed “too big to fail,” the financial system is now more concentrated than ever and the largest banks even larger. As economic recovery seems somewhat more assured and most financial institutions have regrouped sufficiently to repay the governmental support they received, the specific rules and regulations required to make Dodd-Frank operational are facing increasing resistance from both the financial services industry and from within the US judicial system.
This suggests that the Dodd-Frank legislation may be too extensive, too complicated, and too concerned with eliminating past abuses to ever be fully implemented, much less met with compliance. Indeed, it has been called a veritable paradise for regulatory arbitrage. The result has been a call for a more fundamental review of the extant financial legislation, with some suggesting a return to a regulatory framework closer to Glass-Steagall’s separation of institutions by function—a cornerstone of Minsky’s extensive work on regulation in the 1990s. For Minsky, the goal of any systemic reform was to ensure that the basic objectives of the financial system—to support the capital development of the economy and to provide a safe and secure payments system—were met. Whether the Dodd-Frank Act can fulfill this aspect of its brief remains an open question.
Download:Associated Program:Related Topic(s):Commercial banking Dodd-Frank Financial crisis Financial fragility Financial instability Financial regulation Financial regulatory reform Glass-Steagall Act Global financial crisis Hyman Minsky Investment banking Liquidity Monetary policy Money manager capitalism Regulatory reform Securitization Shadow banking Subprime mortgage crisis Too big to fail (TBTF)
Research Project Reports | April 2012This monograph is part of the Levy Institute’s Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis, a two-year project funded by the Ford Foundation.
In the current financial crisis, the United States has relied on two primary methods of extending the government safety net: a stimulus package approved and budgeted by Congress, and a massive and unprecedented response by the Federal Reserve in the fulfillment of its lender-of-last-resort function. This monograph examines the benefits and drawbacks of each method, focusing on questions of accountability, democratic governance and transparency, and mission consistency. The aim is to explore the possibility of reform that would place more responsibility for provision of a safety net on Congress, with a smaller role to be played by the Fed, not only enhancing accountability but also allowing the Fed to focus more closely on its proper mission.
Download:Associated Program:Author(s):Related Topic(s):Commercial banking Deregulation Dodd-Frank Federal Reserve Financial governance Financial instability Financial Stability Oversight Council (FSOC) Glass-Steagall Act Global financial crisis Hyman Minsky Investment banking Lender of last resort (LOLR) Monetary policy Securitization Self-supervision Social safety net Subprime mortgage crisis Too big to fail (TBTF)
Research Project Reports | November 2011
Countries in crisis round the world face the daunting task of dealing with abrupt increases in unemployment and associated deepening poverty. Greece, in the face of her sovereign debt crisis, has been hit the hardest. Remediating employment policies, including workweek reductions and employment subsidies, abound but have failed to answer the call satisfactorily. Direct public-service job creation, instead, enables communities to mitigate risks and vulnerabilities that rise especially in turbulent times by actively transforming their own economic and social environment.
With underwriting from the Labour Institute of the Greek General Confederation of Workers, the Levy Economics Institute was instrumental in the design and implementation of a social works program of direct job creation throughout Greece. Two-year projects, funded from European Structural Funds, have begun.
This report traces the economic trends preceding and surrounding the economic crisis in Greece, with particular emphasis on recent labor market trends and emerging gaps in social safety net coverage. While its primary focus is identifying the needs in Greece, broader lessons for direct job creation are highlighted, and could be applied to countries entertaining targeted employment creation as a means to alleviate social strains during crisis periods.Download:Associated Program(s):Author(s):Related Topic(s):
Research Project Reports | April 2011
Will Dodd-Frank Prevent "It" from Happening Again? `This monograph is part of the Institute's ongoing research program on Financial Instability and the Reregulation of Financial Institutions and Markets, funded by the Ford Foundation. This program's purpose is to investigate the causes and development of the recent financial crisis from the point of view of the late financial economist and Levy Distinguished Scholar Hyman P. Minsky. The monograph draws on Minsky's extensive work on regulation in order to review and analyze the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, enacted in response to the crisis in the US subprime mortgage market, and to assess whether this new regulatory structure will prevent "It"—a debt deflation on the order of the Great Depression—from happening again. It seeks to assess the extent to which the Act will be capable of identifying and responding to the endogenous generation of financial fragility that Minsky believed to be the root cause of financial instability, building on the views expressed in his published work, his official testimony, and his unfinished draft manuscript on the subject. Whether the Dodd-Frank Act will fulfill its brief—in part, "to promote the financial stability in the United States by improving accountability and transparency in the financial system, to end 'too big to fail,' to protect the American taxpayer by ending bailouts, [and] to protect consumers from abusive financial services practices"—is an open question. As Minsky wrote in his landmark 1986 book Stabilizing an Unstable Economy, "A new era of reform cannot be simply a series of piecemeal changes. Rather, a thorough, integrated approach to our economic problems must be developed." This has been one of the organizing principles of our project.Download:Associated Program:Related Topic(s):
Research Project Reports No. 34 | January 2008
South Africa and India
Documents relating to the South Africa and India case studies are available below.
- Appendix A. SAM–SA Technical Report
- Appendix B. Statistical Analysis
- Appendix C. Job Identification Tables
- Appendix D. SAM Reformulation
Annotated BibliographyAssociated Program:Author(s):Related Topic(s):