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Bhaduri–Marglin meet Kaldor–Marx: wages, productivity and investment

Author

Listed:
  • Servaas Storm

    (Delft University of Technology, the Netherlands)

  • C.W.M. Naastepad

    (Delft University of Technology, the Netherlands)

Abstract

Higher real wages provide macroeconomic benefits in terms of increased demand if the economy is wage-led (as in most European economies) and of higher labour productivity growth and more rapid technological progress. Taking these benefits into account, we show that a wage-led economy becomes less strongly wage-led. The impact of higher real wage growth on employment growth becomes ambiguous. But for model parameter values which are realistic for the wage-led eurozone, higher real wages reduce employment growth. Contrariwise, real wage restraint in a weakly wage-led economy generates jobs – as recent European experience underscores. This internal contradiction in wage-led economies can be overcome if a high wage regime is complemented by supportive fiscal and monetary policies.

Suggested Citation

  • Servaas Storm & C.W.M. Naastepad, 2017. "Bhaduri–Marglin meet Kaldor–Marx: wages, productivity and investment," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(1), pages 4-24, January.
    • Handle: RePEc:elg:rokejn:v:5:y:2017:i:1:p4-24
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    Citations

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    Cited by:

    1. Stephen Bell & Michael Keating, 2019. "Low Wage Growth: Why It Matters and How to Fix It," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 52(4), pages 377-392, December.
    2. Cem Oyvat & Oğuz Öztunalı & Ceyhun Elgin, 2020. "Wage‐led versus profit‐led demand: A comprehensive empirical analysis," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 458-486, July.
    3. Nishi, Hiroshi, 2020. "A two-sector Kaleckian model of growth and distribution with endogenous productivity dynamics," Economic Modelling, Elsevier, vol. 88(C), pages 223-243.
    4. Nishi, Hiroshi, 2022. "Income distribution, technical change, and economic growth: A two-sector Kalecki–Kaldor approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 418-432.
    5. Giovanni Covi, 2020. "Euro area growth differentials: diverging and reinforcing factors in a Kaleckian SVAR approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 147-180, February.
    6. Giovanni Covi, 2021. "Trade imbalances within the Euro Area: two regions, two demand regimes," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 181-221, February.
    7. Hiroshi Nishi & Engelbert Stockhammer, 2020. "Cyclical dynamics in a Kaleckian model with demand and distribution regimes and endogenous natural output," Metroeconomica, Wiley Blackwell, vol. 71(1), pages 256-288, February.

    More about this item

    Keywords

    wage-led growth; distribution; employment;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration

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