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A Labor Market-Augmented Empirical Stock-Flow Consistent Model Applied to the Greek Economy

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  • Christos Pierros

Abstract

This paper extends the empirical stock-flow consistent (SFC) literature through the introduction of distributional features and labor market institutions in a Godley-type empirical SFC model. In particular, labor market institutions, such as the minimum wage and the collective bargaining coverage rate, are considered as determinants of the wage share and, in turn, of the distribution of national income. Thereby, the model is able to examine both the medium-term stability conditions of the economy via the evolution of the sectoral financial balances and the implications of functional income distribution on the growth prospects of the economy at hand. The model is then applied to the Greek economy. The empirical results indicate that the Greek economy has a significant structural competitiveness deficit, while the institutional regime is likely debt-led. The policies implemented in the context of the economic adjustment programs were highly inappropriate, triggering private sector insolvency. A minimum wage increase is projected to have a positive impact on output growth and employment. However, policies that would enhance the productive sector's structural competitiveness are required in order to ensure the growth prospects of the Greek economy.

Suggested Citation

  • Christos Pierros, 2020. "A Labor Market-Augmented Empirical Stock-Flow Consistent Model Applied to the Greek Economy," Economics Working Paper Archive wp_949, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_949
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock-Flow Consistent; Labor Market Institutions; Internal Devaluation; Functional Income Distribution; Greece;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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