Wage Led Aggregate Demand in the United Kingdom

Robert Calvert Jump and Ivan Mendieta-Muñoz

MPRA Paper from University Library of Munich, Germany

Abstract: The wage led aggregate demand hypothesis is examined for the United Kingdom over the period 1971 - 2007. Existing studies disagree on the aggregate demand regime for the UK, and this appears to be due to differing empirical approaches. Studies relying on equation-by-equation estimation procedures tend to find support for wage led aggregate demand in the UK, while the single study using systems estimation finds no support for the hypothesis. In order to resolve this incongruity, we test the wage led aggregate demand hypothesis in the UK using VAR models estimated on quarterly data. We use a liberal partial identification strategy based on movements in real earnings rather than in the labour share. The results provide support for the wage led aggregate demand hypothesis during the period of study.

Keywords: Real Earnings; Income Distribution; Business Cycles. (search for similar items in EconPapers)
JEL-codes: B5 E12 E25 E32 (search for similar items in EconPapers)
Date: 2016-02-18
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Wage led aggregate demand in the United Kingdom (2017)
Working Paper: Wage led aggregate demand in the United Kingdom (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:69630

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