IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwwuw/wuwp114.html
   My bibliography  Save this paper

Globalization and the effects of changes in functional income distribution on aggregate demand in Germany

Author

Listed:
  • Engelbert Stockhammer

    (Department of Economics, Vienna University of Economics & B.A.)

  • Eckhard Hein

    (Macroeconomic Policy Institute (IMK), Hans Boeckler Foundation, Duesseldorf)

  • Lucas Grafl

    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

Germany has experienced a period of extreme nominal and real wage moderation since the mid 1990s. Contrary to the expectations of liberal economists this has failed to improve Germany’s mediocre economic performance. However, Germany is now running substantial current account surpluses. One possible explanation for Germany’s disappointing performance is found in Kaleckian theory, which highlights that the domestic demand effect of a decline in the wage share will typically be contractionary, whereas net exports will increase (Blecker 1989). The size of the foreign demand effect will critically depend on the degree of openness of the economy. The paper aims at estimating the demand side of a Bhaduri-Marglin (1990) –type model empirically for Germany. The paper builds on the estimation strategy of Stockhammer, Onaran and Ederer (2007) and Hein and Vogel (2008a, 2008b). The main contribution lies in a careful analysis of the effects of globalization. Since Germany is a large open economy by now it is a particularly interesting case study.

Suggested Citation

  • Engelbert Stockhammer & Eckhard Hein & Lucas Grafl, 2007. "Globalization and the effects of changes in functional income distribution on aggregate demand in Germany," Department of Economics Working Papers wuwp114, Vienna University of Economics and Business, Department of Economics.
  • Handle: RePEc:wiw:wiwwuw:wuwp114
    Note: PDF Document
    as

    Download full text from publisher

    File URL: http://www.wu-wien.ac.at/inst/vw1/papers/wu-wp114.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864.
    2. Epstein,Gerald A. & Gintis,Herbert M., 2011. "Macroeconomic Policy after the Conservative Era," Cambridge Books, Cambridge University Press, number 9780521148412, November.
    3. Philip Arestis & Eckhard Hein & Edwin Le Heron (ed.), 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, number 9b-2007, June.
    4. 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.
    5. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(1), pages 139-159, January.
    6. Eckhard Hein & Achim Truger (ed.), 2007. "Money, Distribution and Economic Policy," Books, Edward Elgar Publishing, number 12580.
    7. Eckhard Hein & Achim Truger (ed.), 2007. "Money, Distribution And Economic Policy - Alternatives to Orthodox Macroeconomics," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, number 9a-2007, June.
    8. Engelbert Stockhammer & Stefan Ederer, 2008. "Demand effects of the falling wage share in Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 481-502, December.
    9. Eckhard Hein & Lena Vogel, 2008. "Distribution and growth reconsidered: empirical results for six OECD countries," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(3), pages 479-511, May.
    10. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    11. Eckhard Hein & Carsten Ochsen, 2003. "Regimes of Interest Rates, Income Shares, Savings and Investment: A Kaleckian Model and Empirical Estimations for some Advanced OECD Economies," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 404-433, November.
    12. C. Naastepad & Servaas Storm, 2006. "OECD demand regimes (1960-2000)," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(2), pages 211-246.
    13. Hatzius, Jan, 2000. "Foreign direct investment and factor demand elasticities," European Economic Review, Elsevier, vol. 44(1), pages 117-143, January.
    14. Wojciech W. Charemza & Derek F. Deadman, 1997. "New Directions In Econometric Practice, Second Edition," Books, Edward Elgar Publishing, number 1139.
    15. Philip Arestis & Eckhard Hein & Edwin Heron (ed.), 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-62734-5, March.
    16. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
    17. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
    18. Philip Arestis & Eckhard Hein & Edwin Le Héron, 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Post-Print halshs-00155170, HAL.
    19. Eckhard Hein & Arne Heise & Achim Truger (ed.), 2006. "Wages, Employment, Distribution and Growth - International Perspectives," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, number 8a-2006, June.
    20. Stefan Eger & Engelbert Stockhammer, 2007. "Wages and Aggregate Demand: An Empirical Investigation for France," Chapters, in: Eckhard Hein & Achim Truger (ed.), Money, Distribution and Economic Policy, chapter 6, Edward Elgar Publishing.
    21. Sabine Stephan, 2006. "German Exports to the Euro Area," Empirical Economics, Springer, vol. 31(4), pages 871-882, November.
    22. Eckhard Hein & Thorsten Schulten & Achim Truger, 2006. "Deflation Risks in Germany and the EMU: The Role of Wages and Wage Bargaining," Palgrave Macmillan Books, in: Eckhard Hein & Arne Heise & Achim Truger (ed.), Wages, Employment, Distribution and Growth, chapter 4, pages 67-92, Palgrave Macmillan.
    23. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    24. Thomas I. Palley, 2006. "Currency Unions, the Phillips Curve, and Stabilization Policy: Some Suggestions for Europe," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 3(2), pages 351-369.
    25. Eckhard Hein & Arne Heise & Achim Truger (ed.), 2006. "Wages, Employment, Distribution and Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37178-1, March.
    26. Sabine Stephan, 2007. "A re-assessment of German import demand," IMK Working Paper 08-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    27. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 13(3), pages 395-412, September.
    28. Brautzsch, Hans-Ulrich & Ludwig, Udo, 2005. "Ganz Westeuropa auf dem Weg in die 'Basarökonomie'?," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW - Leibniz Information Centre for Economics, vol. 85(8), pages 513-517.
    29. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    30. C. W. M. Naastepad, 2006. "Technology, demand and distribution: a cumulative growth model with an application to the Dutch productivity growth slowdown," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(3), pages 403-434, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Engelbert Stockhammer & Stefan Ederer, 2008. "Demand effects of the falling wage share in Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 481-502, December.
    2. Engelbert Stockhammer & Ozlem Onaran, 2013. "Wage-led growth: theory, evidence, policy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 61-78, January.
    3. Engelbert Stockhammer, 2015. "Wage-led versus profit-led demand: What have we learned? A Kalecki-Minsky view," Working Papers PKWP1512, Post Keynesian Economics Society (PKES).
    4. 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.
    5. 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, Cambridge Political Economy Society, vol. 34(4), pages 727-754.
    6. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
    7. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    8. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931.
    9. Engelbert Stockhammer & Robert Stehrer, 2011. "Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run," Review of Radical Political Economics, Union for Radical Political Economics, vol. 43(4), pages 506-522, December.
    10. Jochen Hartwig, 2018. "Wachstumsfolgen von Einkommensungleichheit – Theorie, empirische Evidenz und Politikempfehlungen," Chemnitz Economic Papers 020, Department of Economics, Chemnitz University of Technology.
    11. Cem Oyvat & Oğuz Öztunalı & Ceyhun Elgin, 2020. "Wage‐led versus profit‐led demand: A comprehensive empirical analysis," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 458-486, July.
    12. Armon Rezai, 2015. "Demand and distribution in integrated economies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1399-1414.
    13. Hartwig, Jochen, 2015. "Structural change, aggregate demand and employment dynamics in the OECD, 1970–2010," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 36-45.
    14. Ozan Ekin Kurt, 2020. "Functional income distribution, capacity utilization, capital accumulation and productivity growth in Turkey: A post‐Kaleckian analysis," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 734-766, November.
    15. Cárdenas, Luis & Fernández, Rafael, 2020. "Revisiting francoist developmentalism: The influence of wages in the Spanish growth model," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 260-268.
    16. Eckhard Hein & Lena Vogel, 2007. "Distribution and growth reconsidered - empirical results for Austria, France, Germany, the Netherlands, the UK and the USA," IMK Working Paper 03-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    17. Eckhard Hein & Lena Vogel, 2009. "Distribution and Growth in France and Germany: Single Equation Estimations and Model Simulations Based on the Bhaduri/Marglin Model," Review of Political Economy, Taylor & Francis Journals, vol. 21(2), pages 245-272.
    18. Lavoie, M. & Stockhammer, Engelbert,, 2012. "Wage-led growth : concepts, theories and policies," ILO Working Papers 994709363402676, International Labour Organization.
    19. Jochen Hartwig, 2014. "Testing the Bhaduri-Marglin model with OECD panel data," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(4), pages 419-435, July.
    20. Onaran, Özlem & Galanis, Giorgos, 2013. "Income distribution and aggregate demand: a global Post-Keynesian model," Greenwich Papers in Political Economy 14052, University of Greenwich, Greenwich Political Economy Research Centre.

    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:wiw:wiwwuw:wuwp114. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Department of Economics (email available below). General contact details of provider: http://www.wu.ac.at/economics/en .

    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.