Distribution and growth reconsidered - empirical results for Austria, France, Germany, the Netherlands, the UK and the USA

Eckhard Hein and Lena Vogel ()
Additional contact information
Lena Vogel: University of Hamburg (Student)
Authors registered in the RePEc Author Service: Lena Dräger

No 03-2007, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: The authors analyse the relationship between functional income distribution and economic growth in Austria, France, Germany, the Netherlands, the UK and the USA from 1960 until 2005. The analysis is based on a demand-driven distribution and growth model for an open economy inspired by Bhaduri/Marglin (1990), which allows for profit- or wage-led growth. We find that growth in France, Germany, the UK, and the USA has been wage-led, whereas Austria and the Netherlands have been profit-led. In the case of Austria a domestically wage-led economy is turned profit-led when including the effect of distribution on external trade. The Netherlands, however, are already profit-led without external trade. Our results so far only partially confirm Bhaduri/Marglin's (1990) theoretical conclusion that wage-led growth becomes less feasible when the effects of distribution on foreign trade are taken into account. We conclude that following a strategy of profit-led growth via the net export channel, and therefore relying on a kind of 'beggar thy neighbour' policy, is not only harmful for the trading partners and hence for the world economy in the long run, but also for the wage-led countries pursuing such a strategy in the short run.

Keywords: Distribution; growth; demand-led accumulation regimes (search for similar items in EconPapers)
JEL-codes: E12 E21 E22 E23 E25 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2007-01
New Economics Papers: this item is included in nep-eec, nep-int, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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