Distribution-utilization interactions: a race to the bottom among OECD countries
Codrina Rada and
Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics
We explore four decades of short and long run interactions between income distribution and real economic activity for a panel of OECD countries. Allowing for predator-prey dynamics, we find a convergent, rather than persistent, cycle exhibiting profit-led dynamics. Our regressions suggest that the dynamic interaction of these two variables is rather complicated. Estimating the long run point, we argue that this equilibrium has been shifting as a matter of public policy. We hypothesize that a race to the bottom arises from a need to be competitive in globalized markets. We report evidence that globalization does have a negative long-run effect on the wage share, and perhaps a positive effect on utilization. We also find that other factors have been important: unionization has been pro-labor, while contractionary monetary policy and R&D spending have been anti-labor.
Keywords: predator-prey models; distributive-demand dynamics; panel data estimation JEL Classification: D3; C23 (search for similar items in EconPapers)
Pages: 17 pages
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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2013_13
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