The Dynamics of Profit- and Wage-led Expansion: A Note
Chapter 11 in Wages, Employment, Distribution and Growth, 2006, pp 247-253 from Palgrave Macmillan
Abstract Any redistribution of income between profits and wages would have contradictory effects in terms of aggregate demand, so long as the propensities to consume are different for the two classes. For instance, the lowering of the real wage rate would tend to depress total consumption expenditure by redistributing income against the wage-earners with a higher propensity to consume. At the same time, it might also encourage investment by increasing the margin of profit per unit of sale. Depending on which effect dominates quantitatively, two alternative regimes or paths both led by demand emerge: the consumption-or wage-led path which has also been called ‘stagnationist’, and the investment-or profit-led path called ‘exhilarationist’ (Bhaduri and Marglin 1990; Marglin and Bhaduri 1990).
Keywords: Income Distribution; Product Market; Capacity Utilization; Excess Demand; Full Employment (search for similar items in EconPapers)
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