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Wage Norms, Capital Accumulation and Unemployment: A Post Keynesian View

  • Engelbert Stockhammer

The paper presents a Post Keynesian view of unemployment. It argues, firstly, that the effective labour demand need not be downward sloping with respect to real wages and aggregate demand need not be downward sloping with respect to inflation; secondly, that there is a broad case for unemployment hysteresis, understood as endogeneity of the NAIRU, based on social norms in wage bargaining and on the supply-side effects of capital accumulation; and, thirdly that, much as Keynes had argued, capital investment (rather than labour market institutions) is the key variable to explain changes in aggregate unemployment performance across countries and over time. Overall, the paper advocates a Keynesian view of the NAIRU where effective demand determines unemployment in the short run and the deviation of actual unemployment from the NAIRU determines the change in inflation. In the medium term the NAIRU is endogenous and follows actual unemployment.�

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Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp253.

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Date of creation: 2011
Date of revision:
Handle: RePEc:uma:periwp:wp253
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  1. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
  2. Engelbert Stockhammer & �zlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Oxford University Press, vol. 33(1), pages 139-159, January.
  3. Philip Arestis & Malcolm Sawyer, 2005. "Aggregate demand, conflict and capacity in the inflationary process," Cambridge Journal of Economics, Oxford University Press, vol. 29(6), pages 959-974, November.
  4. Skott, Peter, 2005. "Fairness as a source of hysteresis in employment and relative wages," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 305-331, July.
  5. Dean Baker & Andrew Glyn & David Howell & John Schmitt, 2002. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  6. Philip Arestis & Michelle Baddeley & Malcolm Sawyer, 2007. "The Relationship Between Capital Stock, Unemployment And Wages In Nine Emu Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 59(2), pages 125-148, 04.
  7. Eckhard Hein & Engelbert Stockhammer, 2007. "Macroeconomic policy mix, employment and inflation in a Post-Keynesian alternative to the New Consensus Model," Department of Economics Working Papers wuwp110, Vienna University of Economics and Business, Department of Economics.
  8. Basil J. Moore, 1983. "Unpacking the Post Keynesian Black Box: Bank Lending and the Money Supply," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(4), pages 537-556, July.
  9. Philip Arestis & Iris Biefang-Frisancho Mariscal, 1997. "Conflict, Effort and Capital Stock in UK Wage Determination," Empirica, Springer, vol. 24(3), pages 179-193, October.
  10. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
  11. Stockhammer, Engelbert & Onaran, Ozlem, 2004. "Accumulation, distribution and employment: a structural VAR approach to a Kaleckian macro model," Structural Change and Economic Dynamics, Elsevier, vol. 15(4), pages 421-447, December.
  12. Arestis, Philip & Mariscal, Iris Biefang-Frisancho, 1998. "Capital shortages and asymmetries in UK unemployment," Structural Change and Economic Dynamics, Elsevier, vol. 9(2), pages 189-204, June.
  13. Eckhard Hein & Lena Vogel, 2008. "Distribution and growth reconsidered: empirical results for six OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 32(3), pages 479-511, May.
  14. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  15. Rowthorn, R E, 1977. "Conflict, Inflation and Money," Cambridge Journal of Economics, Oxford University Press, vol. 1(3), pages 215-39, September.
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