Wage shares and demand regimes in Central America: An empirical analysis for Costa Rica, El Salvador, Honduras, Nicaragua, and Panama, 1970-2016

Valeria Jimenez

No 151/2020, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: This paper analyzes the relationship between functional income distribution aggregate demand and economic growth in five Central American countries; Costa Rica, El Salvador, Honduras, Nicaragua, and Panama for the period 1970-2016. It estimates the effects of a change in the wage share on aggregate demand based on a post-Kaleckian model, which allows for either profit- or wage-led demand. The results show that the domestic demand is wage-led in the five countries. The same applies for total demand with the exception of Panama, whose domestically wage-led demand turns profit-led when including the effect of distribution on net exports. Finally, it is argued that there is room for a wage-led recovery in Central America.

Keywords: distribution; aggregate demand; wage share; demand regimes; consumption; investment; net exports; developing countries; Central America (search for similar items in EconPapers)
JEL-codes: E12 E22 E23 E25 E61 F41 (search for similar items in EconPapers)
Date: 2020
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 (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:1512020

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