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On the Dynamics of Profit- and Wage-led Growth

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  • Amit Bhaduri

Abstract

This paper examines how variable output and profit share jointly determine investment and saving, while the difference between investment and saving determines the changes in output and profit share. Analysis of the resulting pair of differential equations yields novel implications for the multiplier process. In this more general framework a number of separate strands of the Keynesian inspired literature can be understood. In particular the model incorporating both forced saving and profit squeeze analyses stability of the dynamical system to bring out the complex relation between in- and out-of-equilibrium profit- and wage-led regimes.

Suggested Citation

  • Amit Bhaduri, 2007. "On the Dynamics of Profit- and Wage-led Growth," wiiw Working Papers 42, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:42
    as

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    File URL: https://wiiw.ac.at/on-the-dynamics-of-profit-and-wage-led-growth-dlp-542.pdf
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    References listed on IDEAS

    as
    1. Skott,Peter, 2008. "Conflict and Effective Demand in Economic Growth," Cambridge Books, Cambridge University Press, number 9780521066310, September.
    2. Amit Bhaduri & Kazimierz Laski & Martin Riese, 2006. "A Model Of Interaction Between The Virtual And The Real Economy," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 412-427, July.
    3. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 267-279.
    4. Hicks, J. R., 1979. "Critical Essays in Monetary Theory," OUP Catalogue, Oxford University Press, number 9780198284239.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. RER targeting revisited (sólo econs)
      by Miguel Olivera in Exabruptos on 2010-04-14 11:50:00
    2. Doubts about wage-led growth
      by chris dillow in Stumbling and Mumbling on 2011-10-05 17:58:38

    Citations

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    Cited by:

    1. Stephen Kinsella, 2013. "Was Ireland's Celtic Tiger Period Profit-led or Wage-led?," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 572-585, October.
    2. Alarco Tosoni, Germán & Castillo García, César, 2018. "Functional distribution of income and growth regime in Peru, 1942−2013," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    3. Nieto, Jaime & Carpintero, Óscar & Lobejón, Luis Fernando & Miguel, Luis Javier, 2020. "An ecological macroeconomics model: The energy transition in the EU," Energy Policy, Elsevier, vol. 145(C).
    4. Vásconez Rodríguez, Alison, 2017. "Economic growth and gender inequality: an analysis of panel data for five Latin American countries," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.

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    More about this item

    Keywords

    profit-led; wage-led; in- and out-of-equilibrium dynamics; local; Liapunov stability; stable-unstable bifurcation; forced saving; profit squeeze; multiplier;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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