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Wage- and profit-led growth regimes: a panel-data approach

Author

Listed:
  • Guilherme de Oliveira

    (Department of Economics and International Relations, Federal University of Santa Catarina, Florianópolis, Brazil)

  • Eduardo Prado Souza

    (Department of Economics and International Relations, Federal University of Santa Catarina, Florianópolis, Brazil)

Abstract

The extensive empirical effort made in the growth and distribution literature to estimate whether economic growth is wage- or profit-led has not sufficiently considered the theoretical foundation of the Neo-Kaleckian model. This paper attempts to respect key tenets of the investment function by estimating a panel-data model in which country-specific structural characteristics and possible endogenous relationships in income distribution and economic growth are explicitly considered. The identification strategy is based on several estimates of the capital stock and the rate of capacity utilization for 61 countries over the period between 1995 and 2014. The main results suggest that the growth regime was wage-led in developed countries, while most developing countries exhibited a profit-led growth regime. Interestingly, however, while the profit-led regime occurs through the international trade channel in Latin American countries, in other developing countries, the causality channel is mainly related to the domestic investment function.

Suggested Citation

  • Guilherme de Oliveira & Eduardo Prado Souza, 2021. "Wage- and profit-led growth regimes: a panel-data approach," Review of Keynesian Economics, Edward Elgar Publishing, vol. 9(3), pages 394-412, July.
    • Handle: RePEc:elg:rokejn:v:9:y:2021:i:3:p394-412
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    More about this item

    Keywords

    economic growth; income distribution; panel data;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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