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Profit shares, investment and output capacity

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  • Palle S. Andersen
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    Abstract

    The main purpose of this paper is to test the hypothesis that, especially in Europe, excessive real wage growth and falling profit shares have been instrumental in reducing investment growth and the employment potential of the capital stock. We also consider the policy implication that a sustainable rise in employment may not be feasible unless higher output growth is led by investment and that this in turn requires continued or even further wage restraint.

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    File URL: http://www.bis.org/publ/work12.pdf
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    Bibliographic Info

    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 12.

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    Length: 68 pages
    Date of creation: Jul 1987
    Date of revision:
    Handle: RePEc:bis:biswps:12

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    1. Martin Feldstein, 1983. "Inflation, Tax Rules, and Investment: Some Econometric Evidence," NBER Chapters, National Bureau of Economic Research, Inc, in: Inflation, Tax Rules, and Capital Formation, pages 243-286 National Bureau of Economic Research, Inc.
    2. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 88(352), pages 661-92, December.
    3. Jorgenson, Dale W, 1971. "Econometric Studies of Investment Behavior: A Survey," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 9(4), pages 1111-47, December.
    4. Ashenfelter, Orley & Card, David, 1986. "Why Have Unemployment Rates in Canada and the United States Diverged?," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 53(210(S)), pages S171-95, Supplemen.
    5. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, American Economic Association, vol. 59(4), pages 457-71, Part I Se.
    6. Sneessens, Henri R & Dreze, Jacques H, 1986. "A Discussion of Belgian Unemployment, Combining Traditional Concepts and Disequilibrium Econometrics," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 53(210(S)), pages S89-119, Supplemen.
    7. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    9. Guy V.G. Stevens, 1986. "Internal funds and the investment functions: exploring the theoretical justification of some empirical results," Special Studies Papers, Board of Governors of the Federal Reserve System (U.S.) 199, Board of Governors of the Federal Reserve System (U.S.).
    10. Fromm, Gary & Ciccolo, John, 1979. ""q" and the Theory of Investment," Journal of Finance, American Finance Association, American Finance Association, vol. 34(2), pages 535-47, May.
    11. Anderson, G J, 1981. "A New Approach to the Empirical Investigation of Investment Expenditures," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 91(361), pages 88-103, March.
    12. Nerlove, Marc, 1972. "Lags in Economic Behavior," Econometrica, Econometric Society, Econometric Society, vol. 40(2), pages 221-51, March.
    13. Barry P. Bosworth & Robert M. Solow & Lawrence H. Summers, 1982. "Capital Formation and Economic Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(2), pages 273-326.
    14. John Helliwell & Peter Sturm & Peter Jarrett & Gérard Salou, 1985. "Aggregate Supply in INTERLINK: Model Specification and Empirical Results," OECD Economics Department Working Papers, OECD Publishing 26, OECD Publishing.
    15. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
    16. Bean, Charles R, 1981. "An Econometric Model of Manufacturing Investment in the UK," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 91(361), pages 106-21, March.
    17. Feldstein, Martin S & Foot, David K, 1971. "The Other Half of Gross Investment: Replacement and Modernization Expenditures," The Review of Economics and Statistics, MIT Press, vol. 53(1), pages 49-58, February.
    18. Wadhwani, Sushil & Wall, Martin, 1986. "The UK Capital Stock--New Estimates of Premature Scrapping," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 2(3), pages 44-55, Autumn.
    19. Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, Econometric Society, vol. 42(3), pages 393-423, May.
    20. Matthew D. Shapiro, 1986. "Investment, Output, and the Cost of Capital," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 111-164.
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