Demand regimes and the business-cycle: Feedback effects between capacity utilization and income distribution taking into account overhead labor - SVAR-estimates for Germany (2007 - 2021)

Mads R. Hansen

No 227/2024, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: In this paper, Structural Vector Autoregressive (SVAR) models of quarterly data between 2007 and 2021 are estimated to assess short-term regimes of aggregate demand and distribution in Germany. The obtained Impulse Response Functions (IRFs) of the conventional neo-Goodwinian baseline case, with an aggregate wage-share, are compared to an alternative model, disaggregating the wage-share. The robustness of the results is tested by imposing an alternative post-Kaleckian ordering of (contemporaneous) causation. For the neo-Goodwinian baseline model, a profit-led demand schedule and a pro-cyclical wage-share are found. Disaggregation reveals, however, that the pro-cyclical wage-share is mainly driven by supervisory wages, while positive shocks in the direct wage-share had a stronger (negative) impact on aggregate demand, than the supervisory wage share. Imposing post-Kaleckian restrictions of causation yields a consistent (although weaker) estimate of the demand-regime but reversed distributive regimes: The aggregated wage-share behaves counter-cyclical, with the supervisory wage-share reacting stronger (negative) than the direct wage share, when subject to a positive shock in capacity utilization.

Keywords: Demand Regime; Aggregate Demand; Distribution; Capacity Utilization; Business Cycle; SVAR; Functional Income Distribution; Overhead Labor; Germany (search for similar items in EconPapers)
JEL-codes: E12 E25 E6 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-eur, nep-hme and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:285377

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