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Competition-oriented Wage Policy and Its Effects on Aggregate Demand in the Netherlands

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  • Stefan Ederer

Abstract

This paper aims at empirically assessing the demand effects of changes in functional income distribution for the Netherlands. Based on a Neo-Kaleckian theoretical macroeconomic model, equations for the main demand aggregates (consumption, investment, exports and imports) are estimated. The effect of an increase in the wage share on these aggregates is calculated from comparative static. Alternatively, a simulation of this effect is run by means of a small macroeconomic model. An increase in the wage share would have positive effects on consumption and affects investment and net exports negatively. The overall effect is still positive; the demand regime is wage-led. A shift in income distribution from profits to wages would therefore stimulate aggregate demand. The Dutch wage policy since 1982 which aimed at restraining real wages seems to have increased international competitiveness but not aggregate demand.

Suggested Citation

  • Stefan Ederer, 2008. "Competition-oriented Wage Policy and Its Effects on Aggregate Demand in the Netherlands," WIFO Working Papers 312, WIFO.
  • Handle: RePEc:wfo:wpaper:y:2008:i:312
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    File URL: https://www.wifo.ac.at/wwa/pubid/31462
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    References listed on IDEAS

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    1. Bénédicte Vidaillet & V. d'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
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    Cited by:

    1. Bruno Jetin & Ozan Ekin Kurt, 2016. "Functional income distribution and growth in Thailand: A post Keynesian econometric analysis," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(3), pages 334-360, July.
    2. Eckhard Hein & Artur Tarassow, 2010. "Distribution, aggregate demand and productivity growth: theory and empirical results for six OECD countries based on a post-Kaleckian model," Cambridge Journal of Economics, Oxford University Press, vol. 34(4), pages 727-754.
    3. Eckhard Hein & Achim Truger, 2011. "Fiscal Policy in the Macroeconomic Policy Mix: A Critique of the New Consensus Model and a Comparison of Macroeconomic Policies in France, Germany, the UK and Sweden from a Post-Keynesian Perspective," Chapters, in: Claude Gnos & Louis-Philippe Rochon (ed.), Credit, Money and Macroeconomic Policy, chapter 12, Edward Elgar Publishing.
    4. Hein, Eckhard, 2011. "Distribution, 'financialisation' and the financial and economic crisis: Implications for post-crisis economic policies," IPE Working Papers 09/2011, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    6. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931.

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    Keywords

    consumption; distribution; demand; foreign trade; investment; Keynesian economics; macroeconomics;
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