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Wage Norms, Capital Accumulation and Unemployment: A Post Keynesian View

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  • Engelbert Stockhammer

Abstract

The paper presents a Post Keynesian view of unemployment. It argues, firstly, that the effective labour demand need not be downward sloping with respect to real wages and aggregate demand need not be downward sloping with respect to inflation; secondly, that there is a broad case for unemployment hysteresis, understood as endogeneity of the NAIRU, based on social norms in wage bargaining and on the supply-side effects of capital accumulation; and, thirdly that, much as Keynes had argued, capital investment (rather than labour market institutions) is the key variable to explain changes in aggregate unemployment performance across countries and over time. Overall, the paper advocates a Keynesian view of the NAIRU where effective demand determines unemployment in the short run and the deviation of actual unemployment from the NAIRU determines the change in inflation. In the medium term the NAIRU is endogenous and follows actual unemployment.

Suggested Citation

  • Engelbert Stockhammer, 2011. "Wage Norms, Capital Accumulation and Unemployment: A Post Keynesian View," Working Papers wp253, Political Economy Research Institute, University of Massachusetts at Amherst.
    • Handle: RePEc:uma:periwp:wp253
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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