Wage- versus profit-led growth in the context of international interactions and public spending: The political aspects of wage-led recovery

Ozlem Onaran

No PKWP1603, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: This paper presents the empirical evidence about the impact of the simultaneous race to the bottom in labour’s share on growth after taking global interactions into account based on the Post-Kaleckian theoretical framework developed by Bhaduri and Marglin (1990). The world economy and large economic areas are likely to be wage-led; and parameter shifts in different periods are unlikely to make a difference in this finding. The effects that can come from a wage-led recovery on growth and hence employment are positive, however they are also modest in magnitude. We then present an alternative scenario based on a policy mix of wage increases and public investment. A coordinated mix of policies in the G20 targeted to increase the share of wages in GDP by 1%-5% in the next 5 years and to raise public investment in social and physical infrastructure by 1% of GDP in each country can create up to 5.84% more growth in G20 countries. The final section addresses the political aspects and barriers to a wage-led recovery.

Keywords: wage share; wage-led growth; globalization; public investment (search for similar items in EconPapers)
JEL-codes: E12 E22 E25 (search for similar items in EconPapers)
Pages: 21
Date: 2016-02
New Economics Papers: this item is included in nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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