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Distribution and capacity utilization in the United States: evidence from state-level data

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  • Luke Petach

    (Massey College of Business, Belmont University, Nashville, TN, USA)

Abstract

Applying previously unused regional data to the problem of wage- versus profit-led growth, this paper estimates a demand-and-distribution system for a panel of US states for the years 1974 to 2014. Using variation in minimum-wage policy across states as an instrument for the labor share, I find that – at a regional level – the United States is strongly wage-led. In the absence of a satisfactory econometric identification strategy, I estimate the distributive curve non-parametrically. The results suggest the presence of significant non-linearities, with US states exhibiting profit-squeeze dynamics at low levels of capacity utilization and wage-squeeze dynamics at high levels. These results suggest difficulties for wage-led policy akin to a coordination failure.

Suggested Citation

  • Luke Petach, 2020. "Distribution and capacity utilization in the United States: evidence from state-level data," Review of Keynesian Economics, Edward Elgar Publishing, vol. 8(2), pages 240-267, April.
    • Handle: RePEc:elg:rokejn:v:8:y:2020:i:2:p240-267
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    Citations

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    Cited by:

    1. Petach, Luke & Tavani, Daniele, 2022. "Aggregate demand externalities, income distribution, and wealth inequality," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 433-446.
    2. Marques, André M. & Lima, Gilberto Tadeu, 2022. "Testing for Granger causality in quantiles between the wage share in income and productive capacity utilization," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 290-312.
    3. Gilberto Tadeu Lima & Andre M. Marques, 2022. "Demand and Distribution in a Dynamic Spatial Panel Model for the United States: Evidence from State-Level Data," Working Papers, Department of Economics 2022_21, University of São Paulo (FEA-USP), revised 05 Oct 2022.

    More about this item

    Keywords

    wage-led growth; demand and distribution; panel data;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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