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Wage- versus profit-led growth in the context of international interactions and public spending: The political aspects of wage-led recovery

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  • Özlem Onaran

    (University of Greenwich)

Abstract

This paper presents the empirical evidence about the impact of the simultaneous race to the bottom in labour’s share on growth after taking global interactions into account based on the Post-Kaleckian theoretical framework developed by Bhaduri and Marglin (1990). The world economy and large economic areas are likely to be wage-led; and parameter shifts in different periods are unlikely to make a difference in this finding. The effects that can come from a wage-led recovery on growth and hence employment are positive, however they are also modest in magnitude. We then present an alternative scenario based on a policy mix of wage increases and public investment. A coordinated mix of policies in the G20 targeted to increase the share of wages in GDP by 1%-5% in the next 5 years and to raise public investment in social and physical infrastructure by 1% of GDP in each country can create up to 5.84% more growth in G20 countries. The final section addresses the political aspects and barriers to a wage-led recovery.

Suggested Citation

  • Özlem Onaran, 2016. "Wage- versus profit-led growth in the context of international interactions and public spending: The political aspects of wage-led recovery," Working Papers PKWP1603, Post Keynesian Economics Society (PKES).
  • Handle: RePEc:pke:wpaper:pkwp1603
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    References listed on IDEAS

    as
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    Cited by:

    1. 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.
    2. 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.

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    More about this item

    Keywords

    wage share; wage-led growth; globalization; public investment;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • 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

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