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Wage inequality and macroeconomic stability: a synergetic approach

Author

Listed:
  • Anna Horodecka

    (Warsaw School of Economics)

  • Liudmyla Vozna

    (Independent researcher)

Abstract

Motivation: The article is dedicated to the relationship between a level of wage inequality and such an aspect of macroeconomic instability as unemployment. Inequality is connected with structure variety of a relevant economic system. As variety is an important object of complexity study, it makes sense to consider the relationship between wage inequality and macroeconomic stability in the light of the synergetic and evolutionary theories, which are directly dealing with phenomena of systems complexity, order and stability. Aim: To present a dispersion (probabilistic) approach in using neoclassical demand and supply curves analysis and, thus, to propose a new definition of the equilibrium problem, which is closer to evolutionary paradigm; with help of the D–S curves, to prove the connection between degree of wage inequality and the general level of unemployment; to demonstrate two types of extreme macroeconomic instability in their relation with the character of wage inequality, and to regard them from the standpoint of the synergetic conception. Results: Both situations — very low and very high wage inequality — are related with extreme macroeconomic instability. The first situation can be related not only with general poverty and homogenous, low skilled workforce, but, primarily, with absence of evolutionary change. A very high wage inequality can be related with inflexible labour markets, low level of social mobility and weak social cohesion. These two situations are comparable with two types of disorder in synergetic conception. With help of the AD–AS curves, the action of macroeconomic synergistic effect is demonstrated; this effect is accompanied by economic growth, decreasing unemployment and the wage levelling. The approach applied in the article confirms some basic propositions of modern macroeconomics and can be used for diminishing the theoretical gap between such opposing interpretations of unemployment as neoclassical and Keynesian.

Suggested Citation

  • Anna Horodecka & Liudmyla Vozna, 2018. "Wage inequality and macroeconomic stability: a synergetic approach," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 17(3), pages 265-277, September.
    • Handle: RePEc:cpn:umkeip:v:17:y:2018:i:3:p:265-277
    DOI: 10.12775/EiP.2018.019
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    References listed on IDEAS

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    More about this item

    Keywords

    wage inequality; unemployment; instability; evolutionary economics; synergistic effect;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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