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Debt or Wage-led Growth : the European Integration

Author

Listed:
  • Disoska, Elena Makrevska

    (University Ss. Cyril and Methodius, Faculty of Economics –Skopje)

  • Toshevska-Trpcevska, Katerina

    (University Ss. Cyril and Methodius, Faculty of Economics –Skopje)

Abstract

This study aims to outline the importance of increasing real wages in European Union member countries. Since the 1970s, the European Union’s original member countries (European Union-15) have pursued a neoliberal strategy, favoring exportled growth. This strategy was supposed to increase the European Union’s international competitiveness by reducing labor costs and encouraging investment as profits garnered a greater share of national income. Since the 1990s, the European Union’s newer members, primarily Central Eastern European countries, have pursued debt-led growth as European Union membership opened financial markets to foreign capital. Both strategies adopted wage moderation and both have been associated with weaker and more volatile growth alongside rising unemployment. We argue that the European Union should adopt a Keynesian demand-led growth model and raise real wages to generate higher effective demand, which is crucial for achieving growth in economies operating below full employment.

Suggested Citation

  • Disoska, Elena Makrevska & Toshevska-Trpcevska, Katerina, 2016. "Debt or Wage-led Growth : the European Integration," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 31(2), pages 326-352.
    • Handle: RePEc:ris:integr:0687
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    Citations

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    Cited by:

    1. A Heise, 2020. "Wage-led and profit-led regime research – promising scientific research programme or scientific cul-de-sac?," Economic Issues Journal Articles, Economic Issues, vol. 25(2), pages 31-49, September.
    2. Dominik Kaczmarski, 2024. "Wage- or Profit-Led Regime? The Case of Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 5-18.
    3. Emil DINGA, 2020. "Theoretical Considerations On The Consumption-Based Economic Growth," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 5(3), pages 16-22.

    More about this item

    Keywords

    Age-led Growth; Profit Share; Demand; European Union-15; Central and Eastern Europe;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F15 - International Economics - - Trade - - - Economic Integration
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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