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The labour market in a Keynesian economic regime: theoretical debate and empirical findings

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  • Hansjörg Herr
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    Abstract

    In a Keynesian mode of thinking wages become the nominal anchor for the price level because unit-labour costs in a closed economy represent the most important factor in determining the price level. The second most important driver of price level changes is the exchange rate. A positive economic regime includes nominal wage increases according to trend productivity growth as well as the target inflation rate of the central bank, discretionary monetary policy geared towards growth and anti-cyclical fiscal policy. Since the early 1990s nominal wages in the USA and the UK have followed this wage norm to a large extent. But in Germany, wages have increased below this norm or even decreased, and in Japan this effect has been even more extreme. Overall, while Japan and Germany have suffered from dysfunctional economic regimes leading to low growth, the UK and USA have managed a much more positive interaction between wage development, monetary policy and fiscal policy. Copyright The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

    Volume (Year): 33 (2009)
    Issue (Month): 5 (September)
    Pages: 949-965

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    Handle: RePEc:oup:cambje:v:33:y:2009:i:5:p:949-965

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    Cited by:
    1. Herr, Hansjörg & Ruoff, Bea, 2014. "Wage dispersion : empirical developments, explanations, and reform options," ILO Working Papers 485325, International Labour Organization.
    2. Herr, Hansjörg & Horn, Gustav A, 2012. "Wage policy today," ILO Working Papers 471360, International Labour Organization.
    3. Nina Dodig & Hansjorg Herr, 2014. "Previous financial crises leading to stagnation – selected case studies," Working papers wpaper24, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. Herr, Hansjörg & Sonat, Zeynep M, 2013. "Neoliberal unshared growth regime of Turkey in the post-2001 period," ILO Working Papers 484126, International Labour Organization.
    5. Dodig, Nina & Herr, Hansjörg, 2014. "Previous financial crises leading to stagnation: Selected case studies," IPE Working Papers 33/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Herr, Hansjörg, 2013. "An analytical framework for the Post-Keynesian macroeconomic paradigm," IPE Working Papers 23/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    7. Herr, Hansjörg & Sonat, Zeynep M., 2013. "Neoliberal Unshared Growth Regime of Turkey in the Post-2001 Period," EconStor Preprints 88606, ZBW - German National Library of Economics.
    8. Herr, Hansjörg, 2009. "Time, expectations and financial markets," IPE Working Papers 03/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    9. Daniel Detzer & Hansjorg Herr, 2014. "Theories of Financial Crises," Working papers wpaper25, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

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