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Is planet Earth as a whole likely to be wage-led?

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  • Arslan Razmi

    (Department of Economics, University of Massachusetts Amherst)

Abstract

Evidence regarding the relationship between distribution, demand, and growth in the short run has been mixed. Open economy models that create the possibility of beggar-thy-neighbor growth offer one theoretical explanation for why this may be expected. Several authors have argued recently, however, that even if demand and growth are profit-led in many individual countries, the global economy is likely to be wage-led since the planet as a whole runs balanced trade. This paper finds that this argument, although intuitively appealing, does not hold up to careful examination. Although the world economy as a whole is a closed system, it is not isomorphic to a closed economy, thanks to repercussion effects, relative price movements, and cross-country heterogeneity. The effects of global redistribution depend on the nature of its constituent economies.

Suggested Citation

  • Arslan Razmi, 2017. "Is planet Earth as a whole likely to be wage-led?," UMASS Amherst Economics Working Papers 2017-11, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2017-11
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    References listed on IDEAS

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    1. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 13(3), pages 395-412, September.
    2. Blecker, Robert A., 1996. "The new economic integration: Structuralist models of North-South trade and investment liberalization," Structural Change and Economic Dynamics, Elsevier, vol. 7(3), pages 321-345, September.
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    More about this item

    Keywords

    Demand regime; income distribution; wage-led growth; neo-Kaleckian open economy models.;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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