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Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run

Engelbert Stockhammer and Robert Stehrer

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: In a seminal paper on Marxian business cycle theory, Richard Goodwin (1967) presented a model which assumed that a higher wage share leads to lower investment and thus a general economic slowdown. In contrast, Michal Kalecki (1971) argued that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income. Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries.

Keywords: functional income distribution; demand; Goodwin cycle; Kalecki; Post Keynesian economics; Marxian economics (search for similar items in EconPapers)
JEL-codes: E11 E12 E20 E22 E25 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-hpe and nep-pke
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Citations: View citations in EconPapers (116)

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