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A Kaldor Matching Model of Real Wage Declines

  • Sattinger, Michael

    ()

    (University at Albany, SUNY)

A model linking macroeconomic phenomena and income distribution in balanced growth equilibria is developed as a variant to the Kaldor model of factor shares. It departs from the original Kaldor model in assuming equal savings rates and production determined by a matching process between workers and jobs. Macroeconomic equilibrium (national savings equal to investment) determines the ratio of jobs to employment and the ratio of unemployed to vacancies. Competitive microeconomic behavior then determines the wage and interest rates. Changes in the ratio of national debt to employment have real effects on factor prices. Implications for effects of taxes and unemployment benefits are derived. The model explains recent declines in real wages relative to productivity.

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File URL: http://ftp.iza.org/dp380.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 380.

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Length: 43 pages
Date of creation: Oct 2001
Date of revision:
Publication status: published in: Journal of Economic Inequality, 2005, 3 (2), 91-108
Handle: RePEc:iza:izadps:dp380
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  1. Bertola, Giuseppe, 2000. "Macroeconomics of distribution and growth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 9, pages 477-540 Elsevier.
  2. Diamond, Peter A., 1980. "An alternative to steady-state comparisons," Economics Letters, Elsevier, vol. 5(1), pages 7-9.
  3. Andrés Erosa & Martin Gervais, 1998. "Optimal Taxation in Life-Cycle Economies," UWO Department of Economics Working Papers 9812, University of Western Ontario, Department of Economics.
  4. Michael Sattinger, 1993. "General Equilibrium Effects of Unemployment Compensation with Labor Force Participation," Discussion Papers 93-03, University at Albany, SUNY, Department of Economics.
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  8. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
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  10. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
  11. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
  12. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
  13. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," Review of Economic Studies, Oxford University Press, vol. 23(2), pages 83-100.
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  15. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. James Tobin, 1990. "Growth and Distribution: A Neoclassical Kaldor-Robinson Exercise," Cowles Foundation Discussion Papers 934, Cowles Foundation for Research in Economics, Yale University.
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  18. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 29(4), pages 267-279.
  19. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  20. Masters, Adrian M, 1999. "Wage Posting in Two-Sided Search and the Minimum Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 809-26, November.
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