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Wage-led versus profit-led demand regimes: the long and the short of it

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  • Robert A. Blecker

    (Department of Economics, American University, Washington, DC, USA)

Abstract

Empirical studies have found mixed results regarding whether various countries have wage-led or profit-led demand regimes. Most of the previous literature has paid little attention to the time dimension of this distinction, but most of the studies that have found profit-led results have used methodologies that emphasize short-run cyclical relationships. This paper argues that demand is more likely to be profit-led in the short run and more likely to be wage-led in the longer term, because the positive effects of lower labor costs on investment and net exports are likely to be strongest in the short run, while the positive effects of a higher wage share on consumption are likely to be strongest in the longer term, at least in the US case (other countries may differ).

Suggested Citation

  • Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
  • Handle: RePEc:elg:rokejn:v:4:y:2016:i:4:p373-390
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rafael Saulo Marques Ribeiro & John S. L. McCombie, Gilberto Tadeu Lima, 2017. "Does Real Exchange Rate Undervaluation Really Promote Economic Growth?," Working Papers, Department of Economics 2017_11, University of São Paulo (FEA-USP).
    2. Engelbert Stockhammer & Joel Rabinovich & Niall Reddy, 2018. "Distribution, wealth and demand regimes in historical perspective," FMM Working Paper 14-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Mark Setterfield, 2017. "Long-run variation in capacity utilization in the presence of a fixed normal rate," Working Papers 1704, New School for Social Research, Department of Economics.
    4. Stockhammer, Engelbert & Rabinovich, Joel & Reddy, Niall, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.

    More about this item

    Keywords

    neo-Kaleckian models; growth and distribution; wage-led growth; profit-led growth; Bhaduri–Marglin;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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