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A Kaldor Matching Model of Real Wage Declines

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  • Sattinger, Michael

    ()
    (University at Albany, SUNY)

Abstract

A model linking macroeconomic phenomena and income distribution in balanced growth equilibria is developed as a variant to the Kaldor model of factor shares. It departs from the original Kaldor model in assuming equal savings rates and production determined by a matching process between workers and jobs. Macroeconomic equilibrium (national savings equal to investment) determines the ratio of jobs to employment and the ratio of unemployed to vacancies. Competitive microeconomic behavior then determines the wage and interest rates. Changes in the ratio of national debt to employment have real effects on factor prices. Implications for effects of taxes and unemployment benefits are derived. The model explains recent declines in real wages relative to productivity.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 380.

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Length: 43 pages
Date of creation: Oct 2001
Date of revision:
Publication status: published in: Journal of Economic Inequality, 2005, 3 (2), 91-108
Handle: RePEc:iza:izadps:dp380

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Keywords: efficient taxation; unemployment benefits; national debt; interest rate; real wage; Kaldor; matching; factor prices;

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  1. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  2. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
  3. Alan B. Krueger, 1999. "Measuring Labor's Share," American Economic Review, American Economic Association, vol. 89(2), pages 45-51, May.
  4. Masters, Adrian M, 1999. "Wage Posting in Two-Sided Search and the Minimum Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 809-26, November.
  5. Michael Sattinger, 1993. "General Equilibrium Effects of Unemployment Compensation with Labor Force Participation," Discussion Papers 93-03, University at Albany, SUNY, Department of Economics.
  6. Andres Erosa & Martin Gervais, 2000. "Optimal taxation in life-cycle economies," Working Paper 00-02, Federal Reserve Bank of Richmond.
  7. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  9. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
  10. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
  11. Bertola, Giuseppe, 2000. "Macroeconomics of distribution and growth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 9, pages 477-540 Elsevier.
  12. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series 1998:2, Uppsala University, Department of Economics.
  13. James Tobin, 1990. "Growth and Distribution: A Neoclassical Kaldor-Robinson Exercise," Cowles Foundation Discussion Papers 934, Cowles Foundation for Research in Economics, Yale University.
  14. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
  15. Diamond, Peter A, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 217-27, April.
  16. repec:fth:prinin:413 is not listed on IDEAS
  17. Diamond, Peter A., 1980. "An alternative to steady-state comparisons," Economics Letters, Elsevier, vol. 5(1), pages 7-9.
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