Distribution and Growth in France (1982-2006): A Cointegrated VAR Approach
In this article, we propose a simple Post Keynesian model so as to test whether French economy is wage or profit-led i.e. whether a wage share increase has a negative or positive impact on economic growth. In that perspective, we estimate econometrically the three behaviour equations of our model (consumption, investment and net exports equations) by using a VECM. Once these equations estimated, we solve our model by using the estimated coefficients and can then conclude on the nature of the French economic regime. Our main conclusion is that French economy would be profit-led. However, although an increase of wage share would have a negative impact on economic growth, this negative impact is very weak, as a one point increase of profit share increases economic growth of only 0.1 %. According to our econometric analysis, wage share increase has a positive impact on consumption and no significant direct effect on the balance of trade. Nevertheless, imports are very sensitive to any output increase, which implies a strong negative impact on the multiplier. Moreover, as the accelerator coefficient (in the investment equation) is not very important, the positive effect of a wage share increase on capital accumulation through consumption is not strong enough to outweigh the negative impact of a wage share increase on investment, consecutive to the decline of profitability. Finally, these two elements –weak accelerator and multiplier effects– well explain why any support of consumption through a wage increase would not have a positive and important impact on French economic growth nowadays. Symmetrically, no positive effect of a wage austerity policy on growth must be expected.
|Date of creation:||26 Oct 2007|
|Date of revision:|
|Publication status:||Published in 11th Workshop on the Research Network "Macroeconomic Policies", Oct 2007, Berlin, Germany|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00192267|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
- Blanchard, Olivier J & Giavazzi, Francesco, 2001.
"Macroeconomic Effects of Regulation and Deregulation in Goods and Labour Markets,"
CEPR Discussion Papers
2713, C.E.P.R. Discussion Papers.
- Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
- Olivier Blanchard & Francesco Giavazzi, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," NBER Working Papers 8120, National Bureau of Economic Research, Inc.
- Olivier Blanchard & Francesco Giavazzi, . "Macroeconomic effects of regulation and deregulation in goods and labor markets," Working Papers 187, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Robert A. Blecker, 1998. "International Competitiveness, Relative Wages, and the Balance-of-Payments Constraint," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 20(4), pages 495-526, July.
When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00192267. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.