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The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers

Pintu Parui

Structural Change and Economic Dynamics, 2021, vol. 58, issue C, 416-443

Abstract: In a post-Keynesian growth model with two types of workers, an attempt is taken to understand changes in financial behaviour and income distribution and their macroeconomic causes and consequences. For a relatively strong speed of adjustment in the financial market and a relatively weak reserve army effect, a stable steady state is achieved in the wage-led demand regime. An endogenous and perpetual business cycles may emerge in both the regimes. While in some scenario, a contraction in the wage gap between white and blue-collar employments can make the steady state unstable, in a profit-led demand regime, a rise in the wage gap can destabilize the economy. A more regulated financial market is desirable for ensuring the economy’s stability in a weak wage-led or a weak profit-led demand regime. A more regulated labour market and a rise in unionization are desirable as these can mitigate income inequality.

Keywords: Financialization; Blue and white-collar workers; Wage gap; Post-Keynesian growth model; Limit cycles (search for similar items in EconPapers)
JEL-codes: E12 E25 E32 E44 J31 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:58:y:2021:i:c:p:416-443

DOI: 10.1016/j.strueco.2021.06.012

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Structural Change and Economic Dynamics is currently edited by F. Duchin, H. Hagemann, M. Landesmann, R. Scazzieri, A. Steenge and B. Verspagen

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