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From Correlation to Ideology? A Critical Reassessment of Wage-Led Growth Claims in Portugal

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  • João Tovar Jalles

Abstract

This paper critically reassesses the claim that Portugal constitutes a stable wage-led growth regime, as argued by Alcobia and Barradas (2023). Combining conceptual analysis, Portuguese time-series evidence and cross-country panel estimations for advanced economies and emerging market and developing economies, the paper shows that the relationship between labour-share growth and output growth is highly unstable and sensitive to specification choices, productivity dynamics, investment controls and external conditions. Once productivity, capital accumulation and competitiveness variables are incorporated, the estimated labour-share effect becomes economically weak and statistically fragile. Historical evidence further indicates that Portuguese growth episodes were more closely associated with productivity convergence, European integration, capital accumulation and external adjustment than with autonomous distributive expansions. The findings suggest that wageled and profit-led classifications should not be interpreted as stable policy-invariant structural characteristics of economies. Instead, the growth effects of distributive changes depend critically on productivity performance, openness, financial conditions and institutional context.

Suggested Citation

  • João Tovar Jalles, 2026. "From Correlation to Ideology? A Critical Reassessment of Wage-Led Growth Claims in Portugal," Working Papers REM 2026/0427, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp04272026
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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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