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Distribution and growth reconsidered - empirical results for Austria, France, Germany, the Netherlands, the UK and the USA

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Author Info

  • Eckhard Hein

    ()
    (IMK at the Hans Boeckler Foundation)

  • Lena Vogel

    ()
    (University of Hamburg (Student))

Abstract

The authors analyse the relationship between functional income distribution and economic growth in Austria, France, Germany, the Netherlands, the UK and the USA from 1960 until 2005. The analysis is based on a demand-driven distribution and growth model for an open economy inspired by Bhaduri/Marglin (1990), which allows for profit- or wage-led growth. We find that growth in France, Germany, the UK, and the USA has been wage-led, whereas Austria and the Netherlands have been profit-led. In the case of Austria a domestically wage-led economy is turned profit-led when including the effect of distribution on external trade. The Netherlands, however, are already profit-led without external trade. Our results so far only partially confirm Bhaduri/Marglin's (1990) theoretical conclusion that wage-led growth becomes less feasible when the effects of distribution on foreign trade are taken into account. We conclude that following a strategy of profit-led growth via the net export channel, and therefore relying on a kind of 'beggar thy neighbour' policy, is not only harmful for the trading partners and hence for the world economy in the long run, but also for the wage-led countries pursuing such a strategy in the short run.

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Bibliographic Info

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 03-2007.

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Length: 52 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:imk:wpaper:03-2007

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Keywords: Distribution; growth; demand-led accumulation regimes;

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References

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Citations

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Cited by:
  1. Stockhammer, Engelbert, 2013. "The Euro crisis and contradictions of Neoliberalism in Europe," Economics Discussion Papers 2013-2, School of Economics, Kingston University London.
  2. Engelbert Stockhammer, 2011. "Polarisierung der Einkommensverteilung als strukturelle Ursache der gegenwärtigen Finanz- und Wirtschaftskrise," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 37(3), pages 378-402.
  3. Engelbert Stockhammer & Stefan Ederer, 2008. "Demand effects of the falling wage share in Austria," Empirica, Springer, vol. 35(5), pages 481-502, December.
  4. Eckhard Hein & Lena Vogel, 2009. "Distribution and Growth in France and Germany: Single Equation Estimations and Model Simulations Based on the Bhaduri/Marglin Model," Review of Political Economy, Taylor & Francis Journals, vol. 21(2), pages 245-272.
  5. Engelbert Stockhammer, 2012. "Rising Inequality as a Root Cause of the Present Crisis," Working Papers wp282, Political Economy Research Institute, University of Massachusetts at Amherst.

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