Macroeconomic outcomes of changing bargaining relationships in open economies. The feasibility of a wage-led economy reconsidered

An important issue in neo-Kaleckian growth theory is whether higher employment and growth can be promoted by increasing the wage share or whether growth and equity are conflicting objectives. It has been argued that profit-led growth regimes are more likely in an open economy, at least in the short-run. This paper reconsiders this question, by developing a macroeconomic model for the medium-run where distribution and inflation are caused by conflicting nom- inal income claims. In this context, we show that the strict alternative between wage-led and profit-led growth is misguided, and that an expansion of real wages and employment is feasible when enduring income policies are established. Hin- drance to these policies is reminiscent of the political opposition to permanent full-employment envisaged by Kalecki. Our analysis suggests that the slowdown of capital accumulation typical of the neoliberal era, is due to recently promoted anti- labour reforms. We have also compared our results with neo-Keynesian macroe- conomic models which share the same emphasis on the role of insitutions in the labour market.