Joseph E. Stiglitz's research while affiliated with Columbia University and other places

Publications (720)

Article
We study insurance markets with nonexclusive contracts, introducing bilateral endogenous information disclosure about insurance sales and purchases by firms and consumers. We show that a competitive equilibrium exists under remarkably mild conditions and characterize the unique equilibrium allocation. With two types of consumers the allocation cons...
Article
Wealth inequality is rising in high-income countries. Can increased public investment financed by higher capital taxes counteract this trend? We examine how such a policy affects the distribution of wealth in a setting with distinct wealth groups: dynastic savers and life-cycle savers. Our main finding is that this policy always decreases wealth in...
Article
This Policy Brief argues that embracing the deep uncertainty about interest rates and other key parameters determining a country’s fiscal position requires a new approach in fiscal policy. It proposes retaining fiscal discretion exercised after making the budget adjust more automatically and rapidly in areas where there is broad consensus that doin...
Article
Banks usually hold large amounts of domestic debt which makes them vulnerable to their own sovereign’s default risk. At the same time, governments often resort to costly bailouts when their banking sector is in trouble. We investigate how the network structure and the distribution of sovereign debt ownership within the banking sector jointly affect...
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Designing policy for climate change requires analyses which integrate the interrelationship between the economy and the environment. We argue that, despite their dominance in the economics literature and influence in public discussion and policymaking, the methodology employed by Integrated Assessment Models (IAMs) rests on flawed foundations, whic...
Chapter
Advances in artificial intelligence and automation have the potential to be labor-saving and to increase inequality and poverty around the globe. They also give rise to winner-takes-all dynamics that advantage highly skilled individuals and countries that are at the forefront of technological progress. This chapter analyzes the economic forces behi...
Article
What can explain the large changes in aggregate demand that occur in the absence of any seemingly corresponding shock to the underlying state variables of the economy? We show that macroeconomic volatility can arise from dispersions of beliefs among agents. Such dispersion gives rise to bets and other trades in speculative assets. Such trades give...
Article
The long-lasting, widespread COVID-19 pandemic has imposed huge challenges on public health as well as economic recovery. Governments must take an active role in designing and enforcing economic policies to address various problems that pure market forces cannot, such as externalities and the absence of risk markets. Covid-19 has exposed deficienci...
Article
This article analyzes the economic impact of the pandemic, providing insights into the consequences of alternative policies. Our framework focuses on three key features: (i) The coronavirus disease (COVID-19) is a sectoral shock of unknown depth and duration affecting some sectors and technologies more than others; (ii) there are constraints in shi...
Article
This paper offers a contribution to the understanding of the interactions between finance, instability and inequality. We investigate the ways income and wealth inequality may have influenced the development of modern financial systems in those advanced economies (such as the US) in which securitization (emblematic of the more general class of comp...
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The existing theoretical analysis of microfinance focuses on the nature of the loan contract such as group liability. We draw attention to the role of missing or imperfect labour markets in understanding some of the important “second generation” debates in microfinance. Our analysis helps explain a number of puzzles in microfinance including high r...
Article
Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new technologies have the tendency to be labor-saving, resource-sa...
Chapter
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The Covid-19 epidemic has unveiled inequalities and instabilities in national and global economic and social systems of many countries, even rich and powerful ones such as the United States. The major economic and social crises that have followed signal that it is now time to reflect on their causes, namely poorly managed globalization and lack of...
Article
The 2008 Global Financial Crisis, and the myriad other crises confronting economies around the world, exposed the inadequacies of the Dynamic Stochastic General Equilibrium models. These models not only hadn’t predicted the crisis, its occurrence was completely outside of their framework. The framework assumes there are no macroeconomic inconsisten...
Article
This article analyzes the economic impact of the pandemic, providing insights into the consequences of alternative policies. Our framework focuses on three key features: (i) COVID-19 is a sectoral shock of unknown depth and duration affecting some sectors and technologies more than others; (ii) there are constraints in shifting resources across sec...
Article
The concentration of risk within financial system is considered to be a source of systemic instability. We propose a theory to explain the structure of the financial system and show how it alters the risk taking incentives of financial institutions. We build a model of portfolio choice and endogenous contracts in which the government optimally inte...
Book
Das BIP ist zwar der bekannteste und gebräuchlichste Wirtschaftsindikator, es kann aber nicht über alle relevanten Aspekte der wirtschaftlichen Leistung und des sozialen Fortschritts Auskunft geben. Dieser Band zeigt, dass das BIP als alleiniger Maßstab für die wirtschaftliche Leistung irreführend ist: Es ist der Fokussierung auf diese Kennzahl zuz...
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This paper provides an explanation for situations in which the fundamental state variables describing the economy do not change, but aggregate consumption experiences significant changes. We present a theory of pseudo-wealth—individuals’ perceived wealth that is derived from expectations of gains in bets arising from heterogeneous expectations. Thi...
Article
The Editorial Board of Industrial and Corporate Change is pleased to announce its newest venture as part of ICC’s ongoing commitment to highlighting important issues in management, economics, and business: starting in 2021 ICC intends to launch an annual Special Issue devoted to the theme of Macro Economics and Development. As important economists...
Article
The COVID-19 crisis is likely to have dramatic consequences for progress on climate change. Imminent fiscal recovery packages could entrench or partly displace the current fossil-fuel-intensive economic system. Here, we survey 231 central bank officials, finance ministry officials, and other economic experts from G20 countries on the relative perfo...
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The purpose of this paper is to discuss the broad issue of how to make the financial sector serve society, at least serve it better than it has until now. Finance has been the centre of attention, for better or for worse, for more than a quartercentury, partly because of its increasing share of GDP, and partly because of the negative behaviour and...
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We analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent‐based model populated by heterogeneous, interacting firms. Agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change, imperfect information, coordination hurdles, and structur...
Article
In recent years, a growing stream of literature has investigated the credit market from a network perspective, highlighting the systemic effects of sectoral or idiosyncratic shocks. Models within this literature have to contain the number of possible agents and interaction channels in order for the models to be tractable, or, in case of large-scale...
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In the original publication of the article, caption of Figure 3 on the third page of Sect. 4.1 was incorrectly published as.
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This article documents that the Gini index is an insufficient measure of inequality and, according to the traditional logic of interpretation, that it may lead to incorrect deductions. Since, apart from concentration, it cannot grasp other relevant features of inequality like heterogeneity and asymmetry—which, beyond its intensity, allow for consid...
Article
Recognizing the importance of the second-best nature of economies, the Stern–Stiglitz report on carbon pricing departed from the recommendation of a single carbon price for all uses at all places and times. This paper provides some of the analytics behind these recommendations. First, I analyze the circumstances in which distributional concerns mak...
Chapter
This chapter provides a critical overview of the steps and measures taken by the United Nations and other multilateral organizations and actors to resolve chronic sovereign indebtedness and contrasts these with private practices that distort any multilateral outcomes, chiefly vulture funds and holdout creditors. These practices are further reinforc...
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This paper analyzes the role of real exchange rate (RER) policies in promoting economic development. Markets provide a suboptimal amount of investment in sectors characterized by learning spillovers. We show that a stable and competitive RER policy may correct for this externality and other related market failures. The resulting development of thes...
Technical Report
Full-text available
The present paper aims at offering a contribution to the understanding of the interactions between finance and inequality. We investigate the ways through which income and wealth inequality may have influenced the development of modern financial systems in advanced economies, the US economy first and foremost, and how modern financial systems have...
Article
This paper shows that there is a presumption that Pareto-efficient taxation entails a positive tax on capital. When tax and expenditure policies can affect the market distribution of income in ways that cannot be directly offset, those effects need to be taken into account, reducing the burden imposed on distortionary redistribution. The paper exte...
Technical Report
Puerto Rico's economy has been suffering a recession for more than a decade. The recession has led to a debt and economic crisis. The lack of opportunities has resulted in migration outflows that affect the lives of thousands of families and leave a higher burden on those who stay. Overall, the current macroeconomic dynamics is destabilizing the li...
Article
This paper makes two contributions. First, we examine the macroeconomic implications of Puerto Rico’s Fiscal Plan certified in March 2017 for fiscal years 2017–18 to 2026–27. Second, we perform a Debt Sustainability Analysis (DSA) that incorporates the expected macroeconomic dynamics implied by the Fiscal Plan in order to compute Puerto Rico’s debt...
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This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behaviour, e.g. incorporating insights from information economics and behavioural economics. Inad...
Chapter
Europe has not done well in the years since the 2008 crisis, with a double dip recession and a recovery far slower than that of the US from whence the crisis came. Among the key reasons for this dismal performance is the euro, or more precisely, the structure of the Eurozone, the institutions, rules, and regulations that were created to ensure grow...
Article
Globalization was oversold. Politicians and some economists wrongly argued for trade agreements on the basis of job creation. The gains to GDP or growth were overestimated, and the costs, including adverse distributional effects, were underestimated. There have been important political consequences of this overselling, including the undermining of...
Article
Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across econ...
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Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across econ...
Article
Seemingly Pareto-improving reforms face more opposition than they should. In earlier work, I presented an explanation: voters correctly saw reforms as part of a long-term dynamic game, and they correctly saw how the reform affected outcomes (e.g., by affecting beliefs or coalition formation). Recent advances in behavioral economics derived from ins...
Article
This paper proposes an institutional solution that can help unlock the flow of low yielding long-term savings towards high-return infrastructure investments. The solution is to transform public-private partnerships (PPPs) in infrastructure as well as the classic model of multilateral development banks. Instead of thinking of PPPs as bilateral contr...
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One often heard counter to the concern about rising income and wealth inequality is that it is wrong to focus on inequality of outcomes in a “snapshot”. Intergenerational mobility and “equality of opportunity”, so the argument goes, is what matters for normative evaluation. In response to this counter, we ask what pattern of intergenerational mobil...
Article
Financial networks have shown to be important in understanding systemic events in credit markets. In this paper, we investigate how the structure of those networks can affect the capacity of regulators to assess the level of systemic risk. We introduce a model to compute the individual and systemic probability of default in a system of banks connec...
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This article grapples with the causes of India’s microfinance crisis. By contrasting Bangladesh’s highly successful Grameen model with the allegedly “universalizable” version of India’s SKS Microfinance (which precipitated the crisis), trust or social capital is isolated—not just narrowly interpreted within standard economic theory, but more broadl...
Article
Significance Estimating systemic risk in networks of financial institutions represents, today, a major challenge in both science and financial policy making. This work shows how the increasing complexity of the network of contracts among institutions comes with the price of increasing inaccuracy in the estimation of systemic risk. The paper offers...
Article
The paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the DSGE community. Although several recent improvements have enhanced the realism of standard models, we argue that major drawbacks still undermine their reliability. In particular, DSGE models still fail to recognize...
Article
The current approach to resolving sovereign debt crises does not work: sovereign debt restructurings come too late and address too little. Though unresolved debt crises impose enormous costs on societies, many recent restructurings have not been deep enough to provide the conditions for economic recovery (as illustrated by the Greek debt restructur...
Chapter
Sovereign debt crises are becoming, once again, frequent. In some cases, the costs to the citizens of those countries facing such crises have been enormous. Deficiencies in the mechanisms for resolving such crises cast a pallor over countries that are not yet in a crisis but worry that they might become so; and indeed, the high costs and uncertaint...
Chapter
Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a c...
Article
Today's weakness in the US economy results from lack of aggregate demand, due to high and growing inequality, underinvestment in public infrastructure and technology that is complementary to private capital, continuing mild austerity, difficulties encountered in making the structural transformation from manufacturing to a service-based economy, and...
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This paper is an attempt to broaden economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas in standard economics the concept of the decision-maker is the rational actor, and in early work in behavioral economics it is the quasi-rational actor influenced by the context...
Article
Financial networks have shown to be important in understanding systemic events in credit markets. In this paper, we investigate how the structure of those networks can affect the capacity of regulators to assess the level of systemic risk. We introduce a model to compute the individual and systemic probability of default in a system of banks connec...
Article
This paper investigates the emerging global landscape for public-private co-investments in infrastructure. The creation of the Asian Infrastructure Investment Bank and other so-called “infrastructure investment platforms†are an attempt to tap into the pool of both public and private long-term savings in order to channel the latter into much nee...
Chapter
This chapter argues that while real business cycles and New Keynesian theories with nominal rigidities may help explain certain historical episodes, alternative strands of New Keynesian economics focusing on financial market imperfections, credit, and real rigidities provide a more convincing interpretation of deep downturns, such as the Great Depr...
Chapter
This chapter, an extension of the Presidential Address to the International Economic Association, evaluates alternative strands of macroeconomics in terms of the three basic questions posed by deep downturns: What is the source of large perturbations? How can we explain the magnitude of volatility? How do we explain persistence?.
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The 2008 crisis was not only a crisis in the economy, but was also a crisis for economics — or at least that should have been the case. As we have noted, the standard models did not do very well. The criticism is not just that the models did not anticipate or predict the crisis (even shortly before it occurred); they did not contemplate the possibi...
Chapter
A central question of economics has been: how do we explain the distribution of income among factors of production, and the distribution of income and wealth among individuals.
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Recent events in the US and Europe have witnessed the limitations of conventional macroeconomic models to predict and explain large economic recessions and crises, and to provide guidance for policies that attempt to resolve them.

Citations

... Concern with climate change in this century will have been a further incentive to study the link between nature-connectedness and attitudes and behaviours related to preservation of natural habitats. The Beyond GDP movement (Stiglitz et al., 2009(Stiglitz et al., , 2018, the Prosperity without Growth movement (Jackson, 2009), and the United Nations Sustainable Development Goals (Sachs, 2008) will also have introduced new happiness research agendas that are less concerned with economic growth and more with environmental 'liveability' (Veenhoven, 2000) of the planet for humans. In developed country contexts, where carbon dioxide emissions make the greatest contribution to climate change, green attitudes and behaviour have emerged as a dominant human well-being research topic. ...
... The center-left transnational global coalition would like to move beyond the current CAC solution, which remains voluntary and case by case, to a more centralized set of procedures, overseen by an international organization or SDRM of some form, with the goal of generating more similar outcomes across diverse occurrences of sovereign default. This group includes José Antonio Ocampo (2017, 1-44, 139-80); most of the UN-affiliated economic development agencies such as ECLAC and the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G24); plus North American experts and institutions with deep Latin American ties, such as Joseph Stiglitz or the Center for Economic Policy Research (CEPR) (Guzman, Ocampo, and Stiglitz 2016;Panizza 2008). ...
... Acemoglu and Restrepo [2] emphasize that innovation processes that relegate labor to the background and that widen income gaps are not an inevitability, but rather a choice, AI can be put to work to enhance welfare if the right policy choices are made. Korinek and Stiglitz [38] concur with the above argument, especially in what concerns income distribution. If AI advances in a direction that causes harm to a large portion of the individuals in society, naturally society will resist innovation, and a 1 Notwithstanding, one should note that not even the most creative human activities are today completely safeguarded from being challenged by AI (e.g., just think about AI art generators). ...
... 67 Contrary to the implication of standard IAMs, we cannot expect the transformation of the whole economyand especially key complex systemsto be delivered by prices alone or even by two policy instruments, or to be satisfactorily informed only by marginal analysis. Change will require coordination of a kind beyond that typically provided by prices (Stiglitz, 2018). It would thus be wrong to assume not just that there are no market failures, but that markets on their own would manage the necessary transformations efficiently. ...
... In general, crises cause a significant deterioration in public finances. This calls for a rethink of tax and spending policies once the recovery is underway, generating long-term structural challenges (OECD, 2021, Sarin andSummers, 2019;Orszag et al, 2021). Some essential aspects of the discussions and analyzes regarding the size of budget deficits refers to the perspective of the state's involvement in the economy to adjust the market failure, the efficient allocation of resources, and the use of the "welfare state" concept (Stoian, 2009). ...
... In addition, this article is also relatable to the Ramsey optimal income taxation literature that rationalizes taxing capital income (e.g., Aiyagari, 1995;Chamley, 2001;Conesa, Kitao & Krueger, 2009;Mattauch et al., 2018;Park, 2014) against the zerocapital-tax result of Chamley (1986) and Judd (1985). Although the main purpose of this article is not for discussing whether a strictly positive rate of capital income tax is desirable or not, in the middle of paving the way to identify effects of technological progress on optimal income taxation, this article obtains optimal capital and labor income tax rates before introducing a change in production technology and finds a new rationale for taxing capital income. ...
... COVID-19 vaccines are effective in reducing severe infections, hospitalizations and fatalities [1,2], however, the availability of doses across countries remains highly non-uniform [3]. While sharing vaccines between countries has been termed a global imperative [4][5][6][7], many countries have not initiated vaccine sharing campaigns or have initiated limited campaigns that could promote vaccine equity worldwide. Vaccine sharing is expected to reduce the intensity of outbreaks in recipients while reducing the risk of case importation when stringent travel regulations are relaxed in a donor country [8][9][10]. ...
... This "doom loop" was a key contributor to the sovereign debt crisis in Europe following the Great Recession. Capponi et al. (2020) propose a model incorporating this amplification mechanism and characterize optimal bailouts in this setting. ...
... The ratio between secondary defaults and primary defaults in the connectivity experiment, for different degrees of connectivity and for all shocks is not credible. In this case, the authorities are in a strategically weak position that hinders the arrangement of a bail-in (Bernard et al. 2022). In this type of scenarios, the authorities are forced to implement public bail-outs, as happened in 2008 during the subprime crisis, notwithstanding the fiscal costs and the moral hazard problems they entail. ...
... By contrast, market mechanisms based on international commodity pricing have entirely failed to assess the real economic and social values of Amazonian landscape and ecosystem resources (99,120). Further, prospects are dim for using market forces in landscape conservation efforts in the near future (51). ...