IDEAS home Printed from https://ideas.repec.org/a/cuf/journl/y2006v7i2p357-383.html
   My bibliography  Save this article

A Post-Kaleckian, Post-Olsonian Approach to Unemployment and Income Inequality in Modern Varieties of Capitalism

Author

Listed:
  • Arne Heise

    (Department of Politics and Economics, Hamburg University)

Abstract

The 'big trade-off', described by Arthur Okun some thirty years ago, is back again. Equality or efficiency, or to put it differently again: modern highly developed economies and societies must choose between the Scylla of income inequality or the Charybdis of unemployment. Furthermore, it seems that the continental European economies ¡ª foremost Germany and France ¡ª have sided with more egalitarian ends accepting higher unemployment. This has occurred whilst the liberal economies such as the United States and the United Kingdom choose higher inequality for lower unemployment. In this paper it is argued that the trade-off is not a supply-side necessity to maintain work effort in a situation of incomplete contracts, but is a politico-economic issue between particular interest groups to seek rents. However, unlike in Mancur Olson's seminal approach, it is not the trade unions which are forming distributional coalitions on the labour market. Rather, it is the meritocracy who are happy to use Keynesian-type demand management in order to advance their material interests by pursuing a 'Meritocratically Optimal Rate of Unemployment' (MORU).

Suggested Citation

  • Arne Heise, 2006. "A Post-Kaleckian, Post-Olsonian Approach to Unemployment and Income Inequality in Modern Varieties of Capitalism," Annals of Economics and Finance, Society for AEF, vol. 7(2), pages 357-383, November.
    • Handle: RePEc:cuf:journl:y:2006:v:7:i:2:p:357-383
    as

    Download full text from publisher

    File URL: http://www.aeconf.net/Articles/Nov2006/aef070209.pdf
    Download Restriction: no
    File URL: http://down.aefweb.net/AefArticles/aef070209.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael Förster, 2000. "Trends and Driving Factors in Income Distribution and Poverty in the OECD Area," OECD Labour Market and Social Policy Occasional Papers 42, OECD Publishing.
    2. JOSEF ZWEIMÜLLER & Erling Barth, 1994. "Bargaining Structure, Wage Determination, and Wage Dispersion in 6 OECD Countries," Kyklos, Wiley Blackwell, vol. 47(1), pages 81-93, February.
    3. Siebert, Horst, 1997. "Labor market rigidities and unemployment in Europe," Kiel Working Papers 787, Kiel Institute for the World Economy (IfW Kiel).
    4. Jean-Marc Burniaux & Thai-Thanh Dang & Douglas Fore & Michael Förster & Marco Mira d'Ercole & Howard Oxley, 1998. "Income Distribution and Poverty in Selected OECD Countries," OECD Economics Department Working Papers 189, OECD Publishing.
    5. Alois Guger & Markus Marterbauer, 2005. "Langfristige Tendenzen der Einkommensverteilung in Österreich," WIFO Monatsberichte (monthly reports), WIFO, vol. 78(9), pages 615-628, September.
    6. Timothy Smeeding, 2002. "Globalization, Inequality and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study," LIS Working papers 320, LIS Cross-National Data Center in Luxembourg.
    7. Riese, Hajo, 1981. "Theorie der Produktion und Einkommensverteilung. (With English summary.)," Kyklos, Wiley Blackwell, vol. 34(4), pages 540-562.
    8. Arne Heise, 2006. "Limitations to Keynesian Demand Management through Monetary Policy: Whither Cartesian Policy Control?," Chapters, in: Mark Setterfield (ed.), Complexity, Endogenous Money and Macroeconomic Theory, chapter 18, Edward Elgar Publishing.
    9. Torsten Persson and Guido Tabellini., 1991. "Is Inequality Harmful for Growth? Theory and Evidence," Economics Working Papers 91-155, University of California at Berkeley.
    10. Hall, Peter A. & Soskice, David (ed.), 2001. "Varieties of Capitalism: The Institutional Foundations of Comparative Advantage," OUP Catalogue, Oxford University Press, number 9780199247752, Decembrie.
    11. Hajo Riese*, 1981. "Theorie Der Produktion Und Einkommensverteilung," Kyklos, Wiley Blackwell, vol. 34(4), pages 540-562, November.
    12. Bowles, Samuel & Edwards, Richard & Roosevelt, Frank, 2005. "Understanding Capitalism: Competition, Command, and Change," OUP Catalogue, Oxford University Press, edition 3, number 9780195138658, Decembrie.
    13. Naastepad, C. W. M. & Kleinknecht, Alfred, 2004. "The Dutch productivity slowdown: the culprit at last?," Structural Change and Economic Dynamics, Elsevier, vol. 15(2), pages 137-163, June.
    14. repec:clr:wugarc:y:2012:v:38i:2p:357 is not listed on IDEAS
    15. Lane Kenworthy & Jonas Pontusson, 2005. "Rising Inequality and the Politics of Redistribution in Affluent Countries," LIS Working papers 400, LIS Cross-National Data Center in Luxembourg.
    16. Jäntti, Markus & Jenkins, Stephen P., 2001. "Examining the Impact of Macro-Economic Conditions on Income Inequality," IZA Discussion Papers 364, Institute of Labor Economics (IZA).
    17. Alois Guger & Markus Marterbauer, 2004. "Die langfristige Entwicklung der Einkommensverteilung in Österreich," WIFO Studies, WIFO, number 25385, Juni.
    18. Arestis, Philip & Sawyer, Malcolm, 1998. "Keynesian Economic Policies for the New Millennium," Economic Journal, Royal Economic Society, vol. 108(446), pages 181-195, January.
    19. Timothy M. Smeeding, 2002. "Globalization, Inequality, and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," Center for Policy Research Working Papers 48, Center for Policy Research, Maxwell School, Syracuse University.
    20. Giersch,Herbert & Paqué,Karl-Heinz & Schmieding,Holger, 1994. "The Fading Miracle," Cambridge Books, Cambridge University Press, number 9780521358699.
    21. Crafts,Nicholas & Toniolo,Gianni (ed.), 1996. "Economic Growth in Europe since 1945," Cambridge Books, Cambridge University Press, number 9780521499644.
    22. Lester C. Thurow, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(2), pages 327-336.
    23. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
    24. Delhey, Jan, 1999. "Inequality and attitudes: postcommunism, western capitalism and beyond," Discussion Papers, Research Unit: Social Structure and Social Reporting FS III 99-403, WZB Berlin Social Science Center.
    25. Timothy M Smeeding, 2002. "Globalisation, Inequality and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," RBA Annual Conference Volume (Discontinued), in: David Gruen & Terry O'Brien & Jeremy Lawson (ed.),Globalisation, Living Standards and Inequality: Recent Progress and Continuing Challenges, Reserve Bank of Australia.
    26. Francesco Lippi, 1999. "Central Bank Independence, Targets and Credibility," Books, Edward Elgar Publishing, number 1615.
    27. Amable, Bruno, 2003. "The Diversity of Modern Capitalism," OUP Catalogue, Oxford University Press, number 9780199261147, Decembrie.
    28. Barth, Erling & Zweimuller, Josef, 1995. " Relative Wages under Decentralized and Corporatist Bargaining Systems," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 369-384, September.
    29. Pierre L. Siklos, 2004. "Central Bank Behavior, the Institutional Framework, and Policy Regimes: Inflation Versus Noninflation Targeting Countries," Contemporary Economic Policy, Western Economic Association International, vol. 22(3), pages 331-343, July.
    30. John Cornwall & Wendy Cornwall, 2005. "Power and Institutions in Macroeconomic Theory," Palgrave Macmillan Books, in: Blandine Laperche & Dimitri Uzunidis (ed.), John Kenneth Galbraith and the Future of Economics, chapter 8, pages 87-104, Palgrave Macmillan.
    31. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
    32. Georg Feigl & Markus Marterbauer & Miriam Rehm, 2012. "Einkommensverteilung und Krise," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 38(2), pages 357-367.
    33. Arne Heise, 2005. "German Social Democratic Economic Politics in the Light of Agenda Theory," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 2(2), pages 131-151.
    34. Timothy Moran, 2005. "Bootstrapping the LIS: Statistical Inference and Patterns of Inequality in the Global North," LIS Working papers 378, LIS Cross-National Data Center in Luxembourg.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Afonso, Óscar, 2016. "Effects of labour-market institutions on employment, wages, R&D intensity and growth in 27 OECD countries: From theory to practice," Economic Modelling, Elsevier, vol. 53(C), pages 48-62.
    2. Tom Van Ourti & Eddy Van Doorslaer & Xander Koolman, 2006. "The Effect of Growth and Inequality in Incomes on Health Inequality: Theory and Empirical Evidence from the European Panel," Tinbergen Institute Discussion Papers 06-108/3, Tinbergen Institute.
    3. Ronald Schettkat & Rongrong Sun, 2009. "Monetary policy and European unemployment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(1), pages 94-108, Spring.
    4. Niklas Potrafke, 2012. "Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006," Public Choice, Springer, vol. 150(1), pages 155-179, January.
    5. Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy: Extended Version," MPRA Paper 37816, University Library of Munich, Germany.
    6. Timothy Smeeding, 2004. "Public Policy and Economic Inequality: The United States in Comparative Perspective," LIS Working papers 367, LIS Cross-National Data Center in Luxembourg.
    7. Gustav A. Horn & Heike Joebges & Torsten Niechoj & Christian R. Proaño & Simon Sturn & Silke Tober & Achim Truger & Till van Treeck, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (I)," IMK Report 38-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    8. Alois Guger & Thomas Leoni, 2008. "Die Entwicklung der Einkommen und der Einkommensverteilung in Oberösterreich," WIFO Studies, WIFO, number 39955, Juni.
    9. Olof B ckman, 2005. "Welfare States, Social Structure and the Dynamics of Poverty Rates: A Comparative Study of 16 Countries, 1980-2000," LIS Working papers 408, LIS Cross-National Data Center in Luxembourg.
    10. Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy," Papers 306, World Trade Institute.
    11. Schettkat, Ronald, 2002. "Institutions in the economic fitness landscape: What impact do welfare state institutions have on economic performance?," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-210, WZB Berlin Social Science Center.
    12. Angeles-Castro, Gerardo, 2006. "The relationship between economic growth and inequality: evidence from the age of market liberalism," Proceedings of the German Development Economics Conference, Berlin 2006 2, Verein für Socialpolitik, Research Committee Development Economics.
    13. Giovanni Cornia & Leonardo Menchini, 2004. "The pace and distribution of health improvements during the last 40 years: some preliminary results," Development Working Papers 194, Centro Studi Luca d'Agliano, University of Milano.
    14. Fischer, Justina A.V., 2012. "Globalization and Political Trust," Papers 285, World Trade Institute.
    15. David R. Howell & Dean Baker & Andrew Glyn & John Schmitt, 2006. "Are Protective Labor Market Institutions Really at the Root of Unemployment? A Critical Perspective on the Statistical Evidence," CEPR Reports and Issue Briefs 2006-14, Center for Economic and Policy Research (CEPR).
    16. Van Ourti, Tom & van Doorslaer, Eddy & Koolman, Xander, 2009. "The effect of income growth and inequality on health inequality: Theory and empirical evidence from the European Panel," Journal of Health Economics, Elsevier, vol. 28(3), pages 525-539, May.
    17. Huang, Ho-Chuan (River) & Fang, WenShwo & Miller, Stephen M. & Yeh, Chih-Chuan, 2015. "The effect of growth volatility on income inequality," Economic Modelling, Elsevier, vol. 45(C), pages 212-222.
    18. Ulman, Lloyd & Gerlach, Knut, 2002. "The Uneasy Triangle," Institute of European Studies, Working Paper Series qt2dd6z05p, Institute of European Studies, UC Berkeley.
    19. Brian Burgoon, 2006. "On Welfare and Terror," Journal of Conflict Resolution, Peace Science Society (International), vol. 50(2), pages 176-203, April.
    20. Lane Kenworthy, 2008. "Government Benefits, Inequality and Employment," LIS Working papers 472, LIS Cross-National Data Center in Luxembourg.

    More about this item

    Keywords

    Unemployment; Income inequality; Political economy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2006:v:7:i:2:p:357-383. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.