Productivity, wages and structural change: a two-sector demand-led model

Ines Heck and Cem Oyvat

No 38601, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: In this paper, we present a Post-Keynesian and Kaleckian two-sector productivity model with short- and medium-run specifications. The model examines the effect of wages on aggregate output, labour productivity and structural change. In our model, the sectors produce different goods with different levels of labour productivity. In the short run, higher wages have a different effect on demand in different sectors, which would influence the output and productivity in these sectors differently and lead to a structural change via spending patterns. In the medium-run specification, the focus shifts to the growth rates of output and productivity. Each sector has a productivity regime and a demand regime, which can be either profit-led or wage-led. Different combinations of regimes lead to different scenarios for productivity growth.

Keywords: productivity; theoretical model (search for similar items in EconPapers)
Date: 2023-02-19
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Persistent link: https://EconPapers.repec.org/RePEc:gpe:wpaper:38601

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