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Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run

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  • Engelbert Stockhammer
  • Robert Stehrer

Abstract

In a seminal paper on Marxian business cycle theory, Richard Goodwin (1967) presented a model which assumed that a higher wage share leads to lower investment and thus a general economic slowdown. In contrast, Michal Kalecki (1971) argued that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income. Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries.

Suggested Citation

  • Engelbert Stockhammer & Robert Stehrer, 2009. "Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run," Working Papers wp203, Political Economy Research Institute, University of Massachusetts at Amherst.
    • Handle: RePEc:uma:periwp:wp203
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    functional income distribution; demand; Goodwin cycle; Kalecki; Post Keynesian economics; Marxian economics;
    All these keywords.

    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
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • 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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