International Competition, Income Distribution and Economic Growth
AbstractThis paper shows that the neo-Keynesian case for wage-led growth does not generally hold in an open economy model. Wage increases cause a loss of competitiveness that reduces the trade balance. If the economy is relatively open to trade and price elasticities satisfy certain restrictions, the worsening of the trade balance more than outweighs the increase in workers' consumption, thus reducing the growth rate. The main theoretical innovation is a flexible markup pricing rule that allows changes in unit labor costs and exchange rates to affect profit margins. Implications for international relations and class conflict are discussed. Copyright 1989 by Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Cambridge Journal of Economics.
Volume (Year): 13 (1989)
Issue (Month): 3 (September)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Arslan Razmi on South-South trade and the limits to wage-led growth
by Matias Vernengo in Naked Keynesianism on 2014-01-06 22:28:00
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