Real Wages, Aggregate Demand, and the Macroeconomic Travails of the US Economy: Diagnosis and Prognosis
AbstractThis chapter argues that, while much attention has been paid to developments in the financial sector as causes of the Great Recession, the ultimate cause of the crisis was, in fact, longer term trends in the real economy. Specifically, it is argued that the tendency for real wages to grow slower than productivity since the 1970s has not only generated ever-increasing income inequality in the US, but has also led to a structural flaw in the process that creates the demand necessary for high employment and rising living standards. Although household debt accumulation postponed the “day of reckoning” associated with this structural flaw, the effect of sluggish real wage growth on the incomes of working households now has the potential to create a future of secular stagnation, not just for workers, but for the US economy as a whole.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Trinity College, Department of Economics in its series Working Papers with number 1005.
Length: 37 pages
Date of creation: Aug 2010
Date of revision:
Contact details of provider:
Postal: 300 Summit Street, Hartford, CT 06106-3100
Phone: (860) 297 - 2485
Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx
More information through EDIRC
Real wage growth; productivity growth; aggregate demand; household debt; Great Recession;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Yun Kim & Mark Setterfield & Yuan Mei, 2012. "Aggregate Consumption and Debt Accumulation: An Empirical Examination of US Household Behavior," Working Papers 1204, Trinity College, Department of Economics.
- Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Study Group (PKSG).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Setterfield).
If references are entirely missing, you can add them using this form.