Wages, income distribution and economic growth in Scandinavia

Erik Bengtsson and Engelbert Stockhammer

No 179, Lund Papers in Economic History from Lund University, Department of Economic History

Abstract: Wage restraint plays an important role in the conventional economic history explanation of the post-war golden growth experience of industrialized economies. Conversely, wage increases harming investment and increasing unemployment have been proffered as explanations for some of the high unemployment during the interwar period. This article argues that the conventional account implicitly only considers effects of wage growth on investment and not the advantageous effects on consumption. Thus, the evaluation of the effects on GDP growth is lop-sided. We employ a Post-Keynesian model to estimate effects of growth in the wage share of national income on consumption, investment, exports and imports separately, and weigh the effects together to estimate total effects on GDP growth, in Scandinavia (Denmark, Norway and Sweden) 1900–2010. Furthermore, we estimate the positive effects of wage pressure on productivity, showing it to be significant and positive in all three countries. We show that the postwar wage push had small positive effects on GDP growth in Denmark and Sweden, and a small negative effect in Norway. Thus, wage restraint is not a valid explanation for the postwar growth miracle. We propose a more comprehensive macroeconomic framework for understanding the implications of labour-capital distribution.

Keywords: functional income distribution; inequality; consumption; investment; Scandinavia; Bhaduri-Marglin model; economic history (search for similar items in EconPapers)
JEL-codes: E12 N14 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2018-10-11
New Economics Papers: this item is included in nep-gro, nep-his, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://lup.lub.lu.se/record/746ccae2-cb7c-417e-951f-79cb330852aa Full text (application/pdf)

Related works:
Working Paper: Wages, income distribution and economic growth in Scandinavia (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:luekhi:0179

Access Statistics for this paper

More papers in Lund Papers in Economic History from Lund University, Department of Economic History Department of Economic History, Lund University, Box 7083, S-220 07 Lund, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Tobias Karlsson () and Benny Carlsson ().