IDEAS home Printed from https://ideas.repec.org/p/pke/wpaper/pkwp1602.html
   My bibliography  Save this paper

Wage-led growth in the EU15 member states: The effects of income distribution on growth, investment, trade balance, and inflation

Author

Listed:
  • Özlem Onaran

    () (University of Greenwich)

  • Thomas Obst

Abstract

This paper estimates a multi-country demand-led growth model for EU15 countries. A decrease in the share of wages in national income in isolation leads to lower growth in Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom, whereas it stimulates growth in Austria, Belgium, Denmark and Ireland. However, a simultaneous decline in the wage share leads to an overall decline in EU15 GDP; hence EU15 as a whole is a wage-led economy. Furthermore, Austria and Ireland also experience negative effects on growth when they decrease their wage share along with their trading partners. The results indicate that a decline in the wage share has had significant negative effects on growth in the EU15 countries and supports the case of wage coordination. We present different wage-led recovery scenarios taking into account further effects of a change in the wage share on prices, nominal unit labour costs, investment, and net exports.

Suggested Citation

  • Özlem Onaran & Thomas Obst, 2016. "Wage-led growth in the EU15 member states: The effects of income distribution on growth, investment, trade balance, and inflation," Working Papers PKWP1602, Post Keynesian Economics Society (PKES).
  • Handle: RePEc:pke:wpaper:pkwp1602
    as

    Download full text from publisher

    File URL: http://www.postkeynesian.net/downloads/working-papers/PKWP1602.pdf
    File Function: First version, 2016
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stefan Ederer & Miriam Rehm, 2017. "Will wealth become more concentrated in Europe?," FMM Working Paper 13-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Marwil J. Dávila-Fernández & Serena Sordi, 2017. "Distributive cycles and endogenous technical change in a BoPC growth model," Department of Economics University of Siena 760, Department of Economics, University of Siena.
    3. repec:elg:ejeepi:v:14:y:2017:i:2:p131-172 is not listed on IDEAS
    4. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    5. Alberto Botta & Eugenio Caversazi & Daniele Tori, 2016. "The macroeconomics of shadow banking," Working Papers PKWP1611, Post Keynesian Economics Society (PKES).
    6. Prante, Franz J., 2017. "Macroeconomic effects of personal and functional income inequality: Theory and empirical evidence for the US and Germany," IPE Working Papers 83/2017, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    7. Robert Jump & Ivan Mendieta-Muñoz, 2017. "Wage led aggregate demand in the United Kingdom," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 565-584, September.
    8. No authors listed, 2017. "Will Wealth Become More Concentrated in Europe?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 172, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    9. Özlem Onaran, 2016. "Secular stagnation and progressive economic policy alternatives," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 13(2), pages 229-240, September.
    10. Caiani, Alessandro & Russo, Alberto & Gallegati, Mauro, 2017. "Are higher wages good for business? An assessment under alternative innovation and investment scenarios," MPRA Paper 80439, University Library of Munich, Germany.
    11. Heinze, Henriette, 2018. "The determinants of German exports: An analysis of intra- and extra-EMU trade," IPE Working Papers 95/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    12. repec:spr:eurase:v:7:y:2017:i:1:d:10.1007_s40822-016-0061-x is not listed on IDEAS
    13. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    14. Won Jun Nah & Marc Lavoie, 2016. "Long run convergence in a neo-Kaleckian open-economy model with autonomous export growth," Working Papers PKWP1604, Post Keynesian Economics Society (PKES).
    15. repec:mes:postke:v:40:y:2017:i:2:p:223-238 is not listed on IDEAS
    16. Baccaro, Lucio & Howell, Chris, 2017. "Unhinged: Industrial relations liberalization and capitalist instability," MPIfG Discussion Paper 17/19, Max Planck Institute for the Study of Societies.
    17. Eckhard Hein & Eckhard Achim Truger, 2017. "Opportunities and limits of rebalancing the Eurozone via wage policies," FMM Working Paper 06-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    Wage share; Growth; European Multiplier; Demand Regime;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pke:wpaper:pkwp1602. 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). General contact details of provider: http://edirc.repec.org/data/pksggea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.