What is the Impact of an Exogenous Shock to the Wage Share? VAR Results for the US Economy, 1973–2018

Deepankar Basu () and Leila Gautham
Additional contact information
Deepankar Basu: Department of Economics, University of Massachusetts Amherst

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: This paper uses a novel empirical strategy to present empirical estimates of the effect of an exogenous shock to distribution on demand and accumulation for the US economy from 1973 to 2018. We use recursive vector autoregressions to identify the impact of shocks to the wage share. We impose restrictions motivated by a simple neo-Kaleckian open-economy model, and build on the recursive identification scheme in Christiano, Eichenbaum and Evans (1999) to show that this small set of plausible and transparent assumptions are sufficient to identify the impact of shocks to distribution. We find that positive shocks to the wage share have long-lasting negative impacts on demand and growth. Our results are robust to the inclusion of additional variables and to differences in specification.

Keywords: Demand-distribution dynamics; neo-Kaleckian models; functional income distribution; VAR estimation (search for similar items in EconPapers)
JEL-codes: C32 D3 E25 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.umass.edu/economics/publications/2019-08.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
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:ums:papers:2019-08

Access Statistics for this paper

More papers in UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics Thompson Hall, Amherst, MA 01003. Contact information at EDIRC.
Bibliographic data for series maintained by Daniele Girardi ( this e-mail address is bad, please contact ).