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The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers

Pintu Parui

MPRA Paper from University Library of Munich, Germany

Abstract: In a post-Keynesian growth model with two types of workers (blue and white-collar workers), an attempt is taken to understand changes in financial behaviour and income distribution and their macroeconomic causes and consequences. For a relatively strong speed of adjustment in the financial market and a relatively weak reserve army effect, a stable steady state is achieved in the wage-led demand regime. Unlike Sasaki et. al. (2013), an endogenous and perpetual business cycles may emerge even in the wage-led demand regime. For a relatively strong reserve army effect, a contraction in the wage gap between white and blue-collar employments can make the steady state unstable. On the contrary, in a profit-led demand regime, a rise in the wage gap can destabilize the economy. A rise in the saving propensity of rentiers (and capitalist) is detrimental to aggregate demand and worsens the income distribution. A more regulated labour market and a rise in unionization are desirable as these can mitigate income inequality.

Keywords: Financialization; Blue and white-collar workers; Wage gap; Post-Keynesian growth model; Limit cycles (search for similar items in EconPapers)
JEL-codes: E12 E25 E32 E44 J31 (search for similar items in EconPapers)
Date: 2020-06-28
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-pke
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