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The conventional wage share vs. full employment: implications for the development of growth theory

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  • Norman Sedgley
  • Bruce Elmslie

Abstract

Traditionally, classical theorists assume a constant conventional share of wages in gross output. This assumption, together with fixed proportions, creates endogenous growth via an 'AK' style model. Pasinetti explored this model when the wage is allowed to adjust to ensure full employment. We use cointegration analysis to explore the empirical tractability of each specification. Full employment suggests productivity growth and per capita growth should be cointegrated. In the alternative, no relationship exists because per capita growth is driven by the growth rate of capital, while labour productivity follows its own path. This suggests a simple test of each specification. Consequences for future development of the classical approach are explored. Copyright 2004, Oxford University Press.

Suggested Citation

  • Norman Sedgley & Bruce Elmslie, 2004. "The conventional wage share vs. full employment: implications for the development of growth theory," Cambridge Journal of Economics, Oxford University Press, vol. 28(6), pages 875-888, November.
  • Handle: RePEc:oup:cambje:v:28:y:2004:i:6:p:875-888
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    File URL: http://hdl.handle.net/10.1093/cje/beh042
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    Cited by:

    1. Hiroaki Sasaki, 2013. "Cyclical growth in a Goodwin–Kalecki–Marx model," Journal of Economics, Springer, vol. 108(2), pages 145-171, March.
    2. Sasaki, Hiroaki, 2010. "Endogenous technological change, income distribution, and unemployment with inter-class conflict," Structural Change and Economic Dynamics, Elsevier, vol. 21(2), pages 123-134, May.

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