EconPapers    
Economics at your fingertips  
 

Wages, income distribution and economic growth in Scandinavia

Erik Bengtsson and Engelbert Stockhammer ()

No PKWP1811, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: Wage restraint plays an important role in the conventional economic history explanation of the post-war golden growth experience of industrialized economies. Conversely, wage increases harming investment and increasing unemployment have been proffered as explanations for some of the high unemployment during the interwar period. This article argues that the conventional account implicitly only considers effects of wage growth on investment and not the advantageous effects on consumption. Thus, the evaluation of the effects on GDP growth is lop-sided. We employ a Post-Keynesian model to estimate effects of growth in the wage share of national income on consumption, investment, exports and imports separately, and weigh the effects together to estimate total effects on GDP growth, in Scandinavia (Denmark, Norway and Sweden) 1900–2010. Furthermore, we estimate the positive effects of wage pressure on productivity, showing it to be significant and positive in all three countries. We show that the postwar wage push had small positive effects on GDP growth in Denmark and Sweden, and a small negative effect in Norway. Thus, wage restraint is not a valid explanation for the postwar growth miracle. We propose a more comprehensive macroeconomic framework for understanding the implications of labour-capital distribution.

Keywords: functional income distribution; inequality; consumption; investment; Scandinavia; Bhaduri-Marglin model; economic history (search for similar items in EconPapers)
JEL-codes: E12 N10 N14 (search for similar items in EconPapers)
Pages: 29
Date: 2018-10
New Economics Papers: this item is included in nep-gro, nep-his, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.postkeynesian.net/downloads/working-papers/PKWP1811.pdf First version, 2018 (application/pdf)

Related works:
Working Paper: Wages, income distribution and economic growth in Scandinavia (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pke:wpaper:pkwp1811

Access Statistics for this paper

More papers in Working Papers from Post Keynesian Economics Society (PKES) Contact information at EDIRC.
Bibliographic data for series maintained by Jo Michell ().

 
Page updated 2020-09-12
Handle: RePEc:pke:wpaper:pkwp1811