From Correlation to Ideology? A Critical Reassessment of Wage-Led Growth Claims in Portugal

Joao Jalles

No 2026/0427, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper critically reassesses the claim that Portugal constitutes a stable wage-led growth regime, as argued by Alcobia and Barradas (2023). Combining conceptual analysis, Portuguese time-series evidence and cross-country panel estimations for advanced economies and emerging market and developing economies, the paper shows that the relationship between labour-share growth and output growth is highly unstable and sensitive to specification choices, productivity dynamics, investment controls and external conditions. Once productivity, capital accumulation and competitiveness variables are incorporated, the estimated labour-share effect becomes economically weak and statistically fragile. Historical evidence further indicates that Portuguese growth episodes were more closely associated with productivity convergence, European integration, capital accumulation and external adjustment than with autonomous distributive expansions. The findings suggest that wageled and profit-led classifications should not be interpreted as stable policy-invariant structural characteristics of economies. Instead, the growth effects of distributive changes depend critically on productivity performance, openness, financial conditions and institutional context.

Keywords: wage-led growth; labour share; productivity growth; Portugal; external competitivenesss. (search for similar items in EconPapers)
JEL-codes: E12 E24 O11 O47 P16 (search for similar items in EconPapers)
Date: 2026-08
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