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Wage led aggregate demand in the United Kingdom

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  • Jump, Robert

    () (Kingston University London)

  • Mendieta-Muñoz, Ivan

    (SOAS University of London)

Abstract

The wage led aggregate demand hypothesis is examined for the United Kingdom over the period 1971 - 2007. Existing studies disagree on the aggregate demand regime for the UK, and this appears to be due to differing empirical approaches. Studies relying on equation-by-equation estimation procedures tend to find support for wage led aggregate demand in the UK, while the single study using systems estimation finds no support for the hypothesis. In order to resolve this incongruity, we test the wage led aggregate demand hypothesis in the UK using VAR models estimated on quarterly data. We use a liberal partial identification strategy based on movements in real earnings rather than in the labour share. The results provide support for the wage led aggregate demand hypothesis during the period of study.

Suggested Citation

  • Jump, Robert & Mendieta-Muñoz, Ivan, 2016. "Wage led aggregate demand in the United Kingdom," Economics Discussion Papers 2016-4, School of Economics, Kingston University London.
  • Handle: RePEc:ris:kngedp:2016_004
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    Cited by:

    1. Onaran, Özlem & Oyvat, Cem & Fotopoulou, Eurydice, 2019. "The effects of gender inequality, wages, wealth concentration and fiscal policy on macroeconomic performance," Greenwich Papers in Political Economy 24018, University of Greenwich, Greenwich Political Economy Research Centre.
    2. Engelbert Stockhammer, 2015. "Wage-led versus profit-led demand: What have we learned? A Kalecki-Minsky view," Working Papers PKWP1512, Post Keynesian Economics Society (PKES).
    3. Stockhammer, Engelbert & Rabinovich, Joel & Reddy, Niall, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.
    4. Engelbert Stockhammer & Joel Rabinovich & Niall Reddy, 2018. "Distribution, wealth and demand regimes in historical perspective," FMM Working Paper 14-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    Real Earnings; Income Distribution; Business Cycles.;

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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