Unemployment benefits, the 'added worker effect' and income distribution in a monetary economy
This paper focuses on the effects of public expenditure for unemployment benefits on the path of income distribution, within the theoretical framework of the monetary theory of production. By contrast to the standard view that unemployment benefits produce bad macroeconomic performances, it will be argued that – by increasing total demand – they boost the level of employment. The increase in the level of employment contributes to generate an ‘added worker effect’, which, in turn, pushes the Government to pay further unemployment benefits. At the same time, once firms’ fixed capital has been completely exploited, firms’ money profits at the aggregate level grow. This, in turn, generates inflationary pressures which reduces real wages. Moreover, following the Smithian argument that increase in demand fosters division of labour within firms, this policy can increase labour productivity, thus eventually counterbalancing the inflationary pressures associated to profits increases. A different policy option has been suggested, where – for the sake of allowing more ‘security’ to workers - the state directly supplies them with goods and services.
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.:
- Alain Parguez & Jean-Gabriel Bliek, 2007. "Full Employment: Can It Be a Key Policy Objective for Europe?," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 36(3), pages 24-46, September.
- David A. Spencer, 2004. "Deconstructing The Labour Supply Curve," Metroeconomica, Wiley Blackwell, vol. 55(4), pages 442-458, November.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780198284345.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
- Smith, Adam, 1977. "An Inquiry into the Nature and Causes of the Wealth of Nations," University of Chicago Press Economics Books, University of Chicago Press, number 9780226763743 edited by Cannan, Edwin, July.
- Alvaro Angeriz & Philip Arestis, 2009. "The consensus view on interest rates and fiscal policy: reality or innocent fraud?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 31(4), pages 567-586, July.
- Gennaro Zezza, 2004.
"Some Simple, Consistent Models of the Monetary Circuit,"
Economics Working Paper Archive
wp_405, Levy Economics Institute.
- Gennaro Zezza, 2004. "Some Simple, Consistent Models of the Monetary Circuit," Macroeconomics 0405006, EconWPA.
- Riccardo Bellofiore & Guglielmo Forges Davanzati & Riccardo Realfonzo, 2000. "Marx Inside the Circuit: Discipline device, wage bargaining and unemployment in a sequential monetary economy," Review of Political Economy, Taylor & Francis Journals, vol. 12(4), pages 403-417.
- Setterfield, Mark, 2007. "The rise, decline and rise of incomes policies in the US during the post-war era: an institutional-analytical explanation of inflation and the functional distribution of income," Journal of Institutional Economics, Cambridge University Press, vol. 3(02), pages 127-146, August.
- Andrea Pacella, 2008. "The Effects Of Labour Market Flexibility In The Monetary Theory Of Production," Metroeconomica, Wiley Blackwell, vol. 59(4), pages 608-632, November.
- Forges Davanzati, Guglielmo & Pacella, Andrea, 2008. "Minimum Wage, Credit Rationing and Unemployment in a Monetary Economy," European Journal of Economic and Social Systems, Lavoisier, vol. 21(2), pages 179-194.
- Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
- Peter Docherty, 2005. "Money and Employment," Books, Edward Elgar Publishing, number 2578.
- Jerry Courvisanos & Anthony J. Laramie & Douglas Mair, 2009. "Tax policy and innovation: A search for common ground," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(2), pages 271-287.
- Guglielmo Forges Davanzati & Andrea Pacella, 2010. "Emulation, indebtedness and income distribution: A monetary theory of production approach," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(1), pages 147-165.
- Hassan Bougrine & Mario Seccareccia, 1999. "Unemployment Insurance and Unemployment: An analysis of the aggregate demand-side effects for postwar Canada," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(1), pages 5-21.
- Edward Nell, 2002. "On Realizing Profits in Money," Review of Political Economy, Taylor & Francis Journals, vol. 14(4), pages 519-530.
- Eladio Febrero, 2008. "The Monetization of Profits in a Monetary Circuit Framework," Review of Political Economy, Taylor & Francis Journals, vol. 20(1), pages 111-125.
- Gilberto Tadeu Lima & Mark Setterfield, 2010. "Pricing Behaviour and the Cost-Push Channel of Monetary Policy," Review of Political Economy, Taylor & Francis Journals, vol. 22(1), pages 19-40.
When requesting a correction, please mention this item's handle: RePEc:pke:wpaper:pkwp1402. 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: (Jo Michell)
If references are entirely missing, you can add them using this form.