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Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run

  • Engelbert Stockhammer

    (Kingston University, London, UK)

  • Robert Stehrer

    (Vienna Institute for International Economic Studies, Vienna, Austria)

In a seminal paper on Marxian business cycle theory, Goodwin (1967) presented a model which assumed that a higher wage share leads to lower investment and thus a general economic slowdown. In contrast Kalecki (1971) was arguing that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income. Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries.JEL classification: E11, E12, E20, E22, E25

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Article provided by Union for Radical Political Economics in its journal Review of Radical Political Economics.

Volume (Year): 43 (2011)
Issue (Month): 4 (December)
Pages: 506-522

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Handle: RePEc:sae:reorpe:v:43:y:2011:i:4:p:506-522
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  1. Jonathan P. Goldstein, 1999. "Predator–Prey Model Estimates of the Cyclical Profit Squeeze," Metroeconomica, Wiley Blackwell, vol. 50(2), pages 139-173, 06.
  2. Engelbert Stockhammer & Eckhard Hein & Lucas Grafl, 2007. "Globalization and the effects of changes in functional income distribution on aggregate demand in Germany," Department of Economics Working Papers wuwp114, Vienna University of Economics and Business, Department of Economics.
  3. Nelson H. Barbosa-Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy-A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, 07.
  4. �Zlem Onaran & Engelbert Stockhammer, 2005. "Two Different Export-Oriented Growth Strategies: Accumulation and Distribution in Turkey and South Korea," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 41(1), pages 65-89, January.
  5. Eckhard Hein & Lena Vogel, 2008. "Distribution and growth reconsidered: empirical results for six OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 32(3), pages 479-511, May.
  6. Desai, Meghnad, 1973. "Growth cycles and inflation in a model of the class struggle," Journal of Economic Theory, Elsevier, vol. 6(6), pages 527-545, December.
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