Distribution-utilization interactions: a race to the bottom among OECD countries

Codrina Rada and David Kiefer

Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics

Abstract: 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
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2013_13

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