Kaleckian models of conflict inflation, distribution and employment: A comparative analysis

Eckhard Hein and Christoph Häusler

No 225/2024, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: This paper conducts a systematic comparison of two main textbook variants within the Kaleckian tradition of post-Keynesian conflict inflation and distribution theory: the Blecker/Setterfield (2019) and Lavoie (1992, 2022) (BSL) model based on Dutt (1987), and the Hein (2023a) and Hein/Stockhammer (2011) (HS) model founded on Rowthorn (1977). Focusing on a basic closed economy framework sans government, we explore various iterations of each approach. Our analysis reveals that disparities chiefly centre around the treatment of price inflation expectations ('indexation') and the incorporation of bargaining power in wage- and price-inflation equations. BSL variants generally yield stable price Phillips curves, stable distribution and employment curves, and hence stable equilibria. Only the BSL3 variant with complete indexation and complete pass-through generates shifting Phillips and employment curves, implying instability. It is thus similar to the HS-0 approach, which has bargaining power and complete indexation representing adaptive expectations in wage inflation and incomplete pass-through in price inflation. Introducing a workers' wage share target directly into the wage-inflation equation, but keeping full indexation/adaptive expectations in wage inflation and incomplete pass-through in price inflation, allows for stable and even flat Phillips curves, stable distribution and employment curves, and hence stable equilibria in the HS approach.

Keywords: conflict inflation; employment; distribution; post-Keynesian models (search for similar items in EconPapers)
JEL-codes: E12 E24 E25 E31 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Kaleckian Models of Conflict Inflation, Distribution and Employment: A Comparative Analysis (2024)
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