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Income distribution and aggregate demand: A global Post-Keynesian model

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  • Özlem Onaran
  • Giorgos Galanis

Abstract

This paper estimates the effects of a change in the wage share on growth at a national and global level in the G20 countries. A decrease in the wage share leads to lower growth in the euro area, Germany, France, Italy, UK, US, Japan, Turkey, and Korea, whereas it stimulates growth in Canada, Australia, Argentina, Mexico, China, India, and South Africa. However, a simultaneous decline in the wage share in all these countries leads to a decline in global growth. Furthermore, Canada, Argentina, Mexico, and India also contract when they decrease their wage-share along with their trading partners.

Suggested Citation

  • Özlem Onaran & Giorgos Galanis, 2013. "Income distribution and aggregate demand: A global Post-Keynesian model," Working Papers PKWP1304, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp1304
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    1. Engelbert Stockhammer & Stefan Ederer, 2008. "Demand effects of the falling wage share in Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 481-502, December.
    2. Stefan Eger & Engelbert Stockhammer, 2007. "Wages and Aggregate Demand: An Empirical Investigation for France," Chapters, in: Eckhard Hein & Achim Truger (ed.), Money, Distribution and Economic Policy, chapter 6, Edward Elgar Publishing.
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    4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    5. Ozlem Onaran, 2009. "Wage share, globalization and crisis: the case of the manufacturing industry in Korea, Mexico and Turkey," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(2), pages 113-134.
    6. Özlem Onaran & Giorgos Galanis, 2013. "Income distribution and aggregate demand: A global Post-Keynesian model," Working Papers PKWP1304, Post Keynesian Economics Society (PKES).
    7. Ann Harrison, 2022. "Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 5, pages 89-135, World Scientific Publishing Co. Pte. Ltd..
    8. Ricardo Molero Simarro, 2011. "Functional Distribution of Income and Economic Growth in the Chinese Economy, 1978-2007," Working Papers 168, Department of Economics, SOAS University of London, UK.
    9. Stockhammer, Engelbert & Onaran, Ozlem, 2004. "Accumulation, distribution and employment: a structural VAR approach to a Kaleckian macro model," Structural Change and Economic Dynamics, Elsevier, vol. 15(4), pages 421-447, December.
    10. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(1), pages 139-159, January.
    11. Eckhard Hein & Achim Truger (ed.), 2007. "Money, Distribution and Economic Policy," Books, Edward Elgar Publishing, number 12580.
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    15. C. Naastepad & Servaas Storm, 2006. "OECD demand regimes (1960-2000)," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(2), pages 211-246.
    16. Onaran, Özlem, 2009. "A crisis of distribution," Greenwich Papers in Political Economy 16224, University of Greenwich, Greenwich Political Economy Research Centre.
    17. Seguino, Stephanie, 1999. "The Investment Function Revisited: Disciplining Capital in Korea," MPRA Paper 6539, University Library of Munich, Germany.
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    Cited by:

    1. Özlem Onaran & Giorgos Galanis, 2013. "Income distribution and aggregate demand: A global Post-Keynesian model," Working Papers PKWP1304, Post Keynesian Economics Society (PKES).
    2. Alberto Cardaci & Francesco Saraceno, 2019. "Inequality and imbalances: a monetary union agent-based model," Journal of Evolutionary Economics, Springer, vol. 29(3), pages 853-890, July.

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    More about this item

    Keywords

    Wage share; growth; global multiplier; consumption; investment; exports; imports; G20; developed and developing countries;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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