Abstract

In a seminal paper on Marxian business cycle theory Goodwin (1967) presented a model, which assumed that a higher wage share leads to lower investment and thus a general economic slowdown.  In contrast Kalecki (1971) was arguing that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income.  Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries.

Full Text:

<www.peri.umass.edu/fileadmin/pdf/working_papers/
working_papers_201-250/WP203.pdf>