Relative Movements of Real Wages and Output

Jochen Hartwig

No 14-355, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: Keynes's essay "Relative Movements of Real Wages and Output" is widely believed to be an important amendment to his General Theory because, in this essay, Keynes relaxed his core assumption of decreasing marginal returns to labour. Non-decreasing marginal returns, however, do not sit comfortably with the prime innovation of the General Theory: the Principle of Effective Demand. This will be demonstrated by performing - for the first time in the literature - numerical simulations with Keynes's Aggregate-Demand-Aggregate-Supply (D/Z) model. The view that Keynes's 1939 essay constitutes an important amendment to his General Theory thus has to be put into perspective.

Keywords: Keynes; Effective demand; D/Z model; Marginal returns to labour (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-03
New Economics Papers: this item is included in nep-hme, nep-hpe, nep-mac and nep-pke
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:14-355

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