IDEAS home Printed from https://ideas.repec.org/p/uta/papers/2025-03.html
   My bibliography  Save this paper

Growth is wage-led in the long run

Author

Listed:
  • Jose Barrales-Ruiz
  • Ivan Mendieta-Muñoz
  • Codrina Rada
  • Rudiger von Arnim

Abstract

The literature on the empirical linkages between economic growth (or other measures of macroeconomic performance) and the functional distribution of income is copious on the short run. The sustained and simultaneous decline in average rates of real GDP growth and the labor share of income in the US in recent decades has led to renewed interest in the long run, in light of the hypothesis of inequality-induced secular stagnation. This paper employs a vector error correction model with time-varying parameters and stochastic volatility to estimate the long run interaction between real GDP growth, labor share and the unemployment rate. Our key result indicates that a lower labor share is associated with a decline in the growth rate - economic growth is wage-led in the long run.

Suggested Citation

  • Jose Barrales-Ruiz & Ivan Mendieta-Muñoz & Codrina Rada & Rudiger von Arnim, 2025. "Growth is wage-led in the long run," Working Paper Series, Department of Economics, University of Utah 2025-03, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2025-03
    as

    Download full text from publisher

    File URL: https://econ.utah.edu/research/publications/2025-03.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Growth and distribution; stagnation; demand regime. JEL Classification: C32; E12; E25; E32; O40.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uta:papers:2025-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/deuutus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.