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Overhead labour and feedback effects between capacity utilization and income distribution: estimations for the USA economy

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  • Lilian Nogueira Rolim

Abstract

Empirical studies on the USA have not reached a consensus on whether its demand is wage- or profit-led, leading many scholars to scrutinize what drives the empirical results. This article tests two possible explanations for profit-led results which are related to the presence of overhead labour. To do so, a vector autoregression model is estimated for the USA from 1964 to 2010 and the wage share is split between supervisors/managers and direct workers. The results support the argument that the income redistribution away from workers and towards managers increased the likelihood of profit-led demand and suggest that an increase in the workers’ share of income would stimulate the economy. Also, increases in capacity utilization negatively affect the supervisors’ share, so that short-run profit-led results may be capturing the cyclical behaviour of the profit share, but the effect becomes positive as time goes by, suggesting a complex determination of functional income distribution, as capacity utilization affects it in ambiguous ways.

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  • Lilian Nogueira Rolim, 2019. "Overhead labour and feedback effects between capacity utilization and income distribution: estimations for the USA economy," International Review of Applied Economics, Taylor & Francis Journals, vol. 33(6), pages 756-773, November.
    • Handle: RePEc:taf:irapec:v:33:y:2019:i:6:p:756-773
    DOI: 10.1080/02692171.2019.1595544
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    Cited by:

    1. Maria Cristina Barbieri Goes & Joana David Avritzer, 2023. "Monetary Policy, Distribution and Autonomous Demand in the US," Working Papers 2307, New School for Social Research, Department of Economics.
    2. Dögüs, Ilhan, 2021. "Production structure, output and profits - A note," ZÖSS-Discussion Papers 88, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    3. Lilian N. Rolim & Carolina Troncoso Baltar & Gilberto Tadeu Lima, 2023. "Income distribution, productivity growth, and workers’ bargaining power in an agent-based macroeconomic model," Journal of Evolutionary Economics, Springer, vol. 33(2), pages 473-516, April.
    4. Michael Cauvel & Miguel Alejandro Sanchez, 2023. "Life Expectancy and the Labor Share in the U.S," Working Papers PKWP2308, Post Keynesian Economics Society (PKES).

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