Macroeconomics with Conflict and Income Distribution

Thomas Palley

Review of Political Economy, 1998, vol. 10, issue 3, 329-342

Abstract: This paper presents a Post Keynesian model explaining the determination of employment and income distribution. A major innovation is the incorporation of the insider-outsider description of labor markets into a macro framework. This introduces power and conflict into the macro process. Microeconomic bargaining considerations are central to macroeconomic outcomes. Endogenous government deflicits can sustain profitability in an otherwise contractionary environment. Firm level profit maximization may not produce macroeconomic profit maximization because firms fail to internalize the effects of economic activity on profitability.

Date: 1998
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DOI: 10.1080/09538259800000037

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