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Wage stagnation and secular stagnation

Author

Listed:
  • Mark Setterfield

    (Department of Economics, New School for Social Research, USA)

Abstract

Slow growth and decline in the wage share of income are prominent stylized facts of US macroeconomic performance over the past 3-4 decades. Most explanations of these phenomenon trace their origins to structural change -- such as deunionization, globalization, or increased corporate concentration. This paper suggests that observed wage stagnation and secular stagnation in the US economy can also be thought of as path-dependent products of policy-induced macroeconomic outcomes in the 1970s/80s. A Marx-Keynes-Schumpeter (MKS) model is developed, in which the coincidence of wage stagnation and secular stagnation is shown to arise from an intial decline in the equilibrium rate of growth, which lowers both the steady-state rate of growth and accompanying wage share. It is then shown that the predictions of the model, following an intial reduction in the equilibrium growth rate, are consistent with a number of other secular macroeconomic pathologies that have afflicted the US economy since 1990.

Suggested Citation

  • Mark Setterfield, 2026. "Wage stagnation and secular stagnation," Working Papers 2601, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:2601
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    Keywords

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    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects

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