profit maximising goes global the race to the bottom we explore four decades of cyclical and long run dynamics in income distribution and economic activity for a panel of 13 oecd countries as measured by the wage share and output gap when modeled as predator prey dynamics economic activity in oecd countries is weakly profit led convergence to a long run equilibrium is relatively slow delaying the profit squeeze stage for many years our race to the bottom model suggests that the oecd countries have been engaged in undercutting each other s real unit labour costs an extension of the model shows that the long run equilibrium has been shifting south west towards a lower wage share it may even be that this race has the undesirable consequence of decreasing economic activity

finance inflation and employment a post keynesian kaleckian analysis the purpose of this paper is to contribute to the post keynesian kaleckian macroeconomic literature we develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt interest plus principal repayment into the consumption and investment expenditures as well as into the inflation generating process we explore the way that finance influences the distribution effects of inflation in the demand side of a money credit using economy we suggest a new phillips curve that encapsulates the impact of financial commitments on wage and profit claims we argue that high debt and cash payment commitments are likely to be associated with a positive demand side effect of inflation on the rate of employment and that they might be conducive to a negative supply side effect of employment on the inflation rate the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved

income distribution and current account imbalances we develop a three country stock flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances each country has a household sector and a non household corporate sector the household sector is divided into income deciles and consumer demand is characterized by upward looking status comparisons following the relative income hypothesis of consumption the strength of consumption emulation depends on country specific institutions the model is calibrated for the united states germany and china simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the united states since the early 1980s can be explained by the interplay of rising top end household income inequality and institutions on the other hand the weak domestic demand and increasing current account balances of germany and china since the mid 1990s are strongly related to shifts in the functional income distribution at the expense of the household sector

demographic growth harrodian in stability and the supermultiplier a basic kaleckian model is enriched by three simple intuitive assumptions first there is a redistributive system of the wage bill between employed and unemployed workers the latter receiving subsistence income second only individuals with an income above the subsistence level build savings the combination of these two assumptions gives rise to an autonomous consumption component whose rate of growth depends on population growth consequently the rate of capital accumulation spontaneously converges towards the rate of population growth the supermultiplier effect a dynamic that offers a solution to one of the two harrodian instability problems the third assumption corresponds to entrepreneurs attempts to adjust investments to restore the normal rate of capacity utilisation although this assumption usually generates knife edge instability we show here that the stabilising properties of the supermultiplier provided that the accelerator effect is not overly strong help overcome this instability and realise the normal rate of capacity utilisation therefore the model may offer a simple simultaneous solution to the two harrodian instability problems

food supply and inflation abstract the paper presents an analytic version of the latin american structuralist theory of inflation it emphasizes the difference between the productive sectors of the economy and draws attention to the fact that the inflationary process is closely linked to inconsistent claims for shares in income it describes a keynesian economy with two three sectors real desired wages are rigid money is passive it is shown that the structuralist hypotheses are capable of generating disequilibria that can lead to constantly rising prices without any built in mechanism to offset them steady inflation can only persist if workers allow their real wage to be kept below target as the workers try to catch on the model will blow up an accelerating inflation can be observed in many latin american countries during periods when wage settlements aimed at restoring inflation losses escaped the government control the paper also explores the implications of foreign trade it shows that under structuralist hypotheses external disequilibria cannot be corrected through exchange rate devaluations alone and it examines the stagflationary impacts of an increase in the price of imported intermediates

heterodox theories of economic growth and income distribution a partial survey heterodox theories of economic growth and income distribution are surveyed focusing on major theories and recent contributions first a general framework for examining growth and distribution is discussed in terms of which classical marxian and post keynesian kaleckian and other theories are presented since this framework examines how variables are determined in equilibrium second dynamics behind equilibria are examined focusing on goods market and labor market changes third the framework is extended in a variety of ways to examine additional models addressing productivity growth and technical change money and inflation finance and debt additional distributional considerations multisector issues open economy questions and the environment it is concluded that the literature on heterodox theories of growth and distribution is vibrant large and growing and addresses many issues that are ignored or neglected in orthodox theories including power unemployment and aggregate demand

characterization of the von neumann morgenstern stable set in a non cooperative model of dynamic policy making with a persistent agenda setter abstract we generalize the dynamic bargaining game of diermeier and fong 2011 to arbitrary quota rules to provide a non cooperative characterization of the von neumann morgenstern stable set assuming that players are sufficiently patient and have strict preferences a pure strategy stationary equilibrium exists and in any such equilibrium a policy is a steady state if and only if it is in the stable set the result provides a non cooperative foundation of stable sets in settings with dynamic policy making and a persistent agenda setter

stagnation income distribution and monopoly power the deceleration in the rate of industrial growth in the indian economy since the middlesixties initially interpreted by some as a temporary downward deviation from trend hasnow come to be generally accepted as reflecting long run tendencies towards stagnation several explanations for these tendencies have been offered bhagwati and desai 1970 and bhagwati and srinivasan 1975 have focused on inefficiencies and the misallocationof resources arising from industrial policies pursued by the government others chakravarty 1974 raj 1976 and vaidyanathan 1974 among them have emphasisedthe sluggishness of agricultural growth which is alleged to have retarded industrial growthby limiting markets and the supply of wage goods and raw materials a third view reflectedin srinivasan and narayana 1977 for example has put the blame on a slackening of invest ment demand due to lower public investment but does not explain why public investmentfell or why its fall restrained industrial growth finally there is the explanation put forthin bagchi 1970 1975 1982 in nayyar 1978 and in parts of mitra 1977 that inequali ties in income distribution have resulted in a limited demand for industrial goods reducedincentives for investment and therefore reduced growth this view seems to suggest apositive relation between growth and income equality which is opposed to the generallyaccepted idea derived from cambridge growth models that higher growth requires greaterinequality the purpose of this paper is to examine the last explanation by considering the inter action between growth and income distribution in an underdeveloped economy with thehelp of a simple macroeconomic model the model is a stylisation of the indian economy so that we will be able to use the model to assess the argument that a deceleration in therate of growth of the indian industrial economy could have been caused by an unequaldistribution of income the argument will not be made that this income distributional con straint is the binding constraint on industrial growth the model will merely examine theinternal consistency of the argument that a bad income distribution could explain stagnation in the sense of reduced growth and show that in the indian context as in other similarcontexts this argument can be put forward in explaining stagnation our argument is first presented with a highly simplified schematisation of the indianeconomy which we shall call the basic model the economy modelled produces only one

training migration and regional income disparities abstract it is assumed that there are two regions that production requires both skilled and unskilled labour and that one region is innately more productive than the other workers who differ in their migration or training costs make individually rational decisions in equilibrium the ratio of skilled workers to unskilled workers is always higher in the more productive region average incomes differ between regions because regional differences in wage rates are reinforced by regional differences in the structure of employment the model is also used to analyse the effects of policies intended to equalize the distribution of income

income distribution and growth in east asia it is widely believed that the east asian economies performed exceptionally well not only in generating growth but also in keeping inequality low this study tries to answer the questions raised by the claims of exceptionality of income distribution in east asia central findings are that only japan korea and taiwan have legitimate claims to low inequality that the east asian economies distinguished themselves by their ability to translate high profit shares into high savings and investment rates and that low inequality and high profit shares coexisted primarily due to the unusually even distribution of wealth

gender inequality and economic growth a cross country analysis abstract this paper investigates empirically the determinants of economic growth for a set of semi industrialized export oriented economies in which women provide the bulk of labor in the export sector the primary hypothesis tested is that gender inequality which contributes to women s relatively lower wages was a stimulus to growth via the effect on exports during 1975 95 empirical analysis shows that gdp growth is positively related to gender wage inequality in contrast to recent work which suggests that income inequality slows growth evidence also indicates that part of the impact of gender wage inequality on growth is transmitted through its positive effect on investment as a share of gdp

distribution aggregate demand and unemployment in oecd countries the primary aim of this paper is to investigate the role of income distribution in the determination of unemployment to this end the author develops a post keynesian model that shows that unemployment is effectively determined by income distribution aggregate demand and the inadequacy of capital equipment the deriv ed unemployment equation is applied to ten large industrial countries o ver the period 1976 89 the empirical findings provide strong support fo r the hypothesis that shifts in income distribution and inadequacy of capital equipment are major sources of unemployment copyright 1993 by royal economic society

a supermultiplier stock flow consistent model the return of the paradoxes of thrift and costs in the long run supermultiplier models have been recently brought to the post keynesian debate yet these models still rely on quite simple economic assumptions being mostly ow models which omit the nancial determinants of autonomous expenditures since the output growth rate converges in the long run to the exogenously given growth rate of non capacity creating autonomous expenditure and the utilization rate moves towards the normal utilization rate the paradoxes of thrift and costs remain valid only as level e ects average growth rates this paper investigates whether the core conclusions of supermultiplier models hold in a more complex economic framework described by means of a supermultiplier sfc model in which private business investment is assumed to be completely induced by income while the autonomous expenditure component in this case consumption out of wealth becomes endogenous the results of the numerical simulation experiments suggest that the paradox of thrift can remain valid in terms of growth e ects and that a lower pro t share can also be associated to a higher accumulation rate though with a lower pro t rate

dynamic pivotal politics we analyze a dynamic extension of a parsimonious model of lawmaking in which preferences evolve over time and today s policy becomes tomorrow s status quo unlike in existing models of pivotal politics policy makers voting behavior depends on the institutional environment and on their expectations about future economic and political shocks relative to sincere voting the equilibrium behavior exhibits a strategic polarization effect which increases with the degree of consensus required by the institution the volatility of the policy environment and the expected ideological polarization of the future policy makers the equilibrium behavior also exhibits a strategic policy bias which works against any exogenous policy bias embedded in the voting rule our analysis implies that the existing literature underestimates the inertial effect of checks and balances and overestimates the impact of institutional biases such as fiscally conservative budget procedures

growth distribution trade offs the role of capacity utilisation previous empirical studies of the impact of economic growth on income distribution have consistently found statistically insignificant impact this paper empirically reexamines this impact for a cross section of thirty nine advanced and developing countries focusing on a new critical factor i e the presence or absence of economic slack with this factor included growth becomes significantly unequalizing in a capital taut economy while the presence of slack capacity plays a significantly equalizing role this suggests that the insignificant finding of previous studies stems from an averaging out of these two opposite impacts when this factor is omitted copyright 1988 by oxford university press

the wage goods constraint on a developing economy theory and evidence abstract in a dual economy the traditional or agricultural sector generally has a relatively low supply response to prices if in addition the real wages of the modern or industrial sector are denominated at least partly in terms of the product of agriculture then agricultural output sets an upper bound on employment in industry such a constraint may be binding in the short run whenever the level of food production is low this is called the wage goods constraint this paper examines the analytics of a wage goods constraint in the framework of a two commodity model of a dual economy with surplus labor where unconstrained industrial output is demand determined the effects of either expansionary or redistributive policy may be quite different and sometimes perverse in a situation where the wage goods constraint is binding next data for the indian economy is used to test the hypothesis that the wage goods constraint was binding in the indian industrial sector between the years 1955 to 1980 the results indicate that this was the case for most of the period

on dynamic compromise abstract most legislatures require the consent of only a simple majority to pass a proposal so why don t legislative outcomes favor only a bare majority we show that compromise can be achieved if legislators are neither too impatient nor too patient and initial allocations are not too unequal the compromise is only sustainable if starting from the unequal allocations there is a possibility of spiraling towards a complete absence of compromise we find that the range of discount factors for which the equilibrium exists increases as the number of legislators increases in this sense compromise is easier in larger legislatures

migration with fiscal externalities abstract this paper analyses the distribution of a country s population among regions when migration involves fiscal externalities the main question addressed is whether a decentralized decision making of regional governments can produce an optimal population distribution as recently asserted or a centralized intervention is indispensable as argued before in the literature in analysing this issue it is assumed that migration is costly and accordingly the problem is modelled in a dynamic setup it turns out that while with costless mobility the fiscal externality is fully internalized by voluntary interregional transfers with costly mobility centrally coordinated transfers still remain indispensable for achieving the socially optimal allocation

growth distribution and sectoral heterogeneity reading the kaleckians in latin america abstract the aim of this paper is to explore a parallelism between two episodes in the history of economic thought in order to suggest that the interaction between them can contribute to the research on kaleckian growth and distribution models first a brief summary of the theoretical development from steindl s stagnationist claims to the debate about demand regimes is offered then a more detailed account is provided of the latin american debate that began with furtado s stagnationist claims and resulted in the formulation of models of social articulation and disarticulation finally an analytical classification of kaleckian and latin american growth and distribution models is provided indicating the way in which sectoral heterogeneity and demand composition can act as a plausible link between growth and distribution

bargaining power effective demand and technical progress a kaleckian model of growth following the kaleckian tradition this paper presents a demand led growth model in which the distribution of income is fully endogenised this is done by introducing claims on income by workers and firms the bargaining power of these two groups affects through distribution the patterns of accumulation and inflation in turn the bargaining power of workers is affected by the rate of change of employment the paper discusses the model s static and dynamic implications including the effects of exogenous and induced technical progress the model confirms all the typical kaleckian results including the fact that increases in real wages may lead to accelerating accumulation as well as inflation it also produces a new result it is possible that an increase in the rate of change of labour productivity may not lead to an increase in the rate of change of employment

monopoly power and uneven development baran revisited baran examined the implications of the rise in monopoly power in advanced economies for the underdevelopment in poor countries and the process of uneven development on a world scale this article examines his work critically and then presents a north south model which defines uneven development in a precise manner and analyses the mechanism by which the rise in monopoly power leads to such uneven development it is shown that the process can work even without reference to imperialism which is a central but controversial element in baran s analysis

the effects of income distribution and fiscal policy on aggregate demand investment and the budget balance the case of europe this paper develops a multi country post kaleckian model that incorporates the role of the government one key novelty of the model is that it integrates cross country effects of both changes in income distribution and fiscal policy the model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in eu15 countries the results show that a simultaneous increase in the wage share in all eu15 countries would increase demand and the primary budget balance in all countries a simultaneous increase in government spending turns out to boost economic activity in all the eu15 countries indicating the positive economic effects of expansionary fiscal policy moreover a progressive tax policy that would be implemented simultaneously at the eu level would lead to an increase in output in all countries

attachment to home and efficient purchases of population in a fiscal externality economy abstract this paper examines the efficiency properties of an economy characterized by strategically competing regions and individuals with varying degrees of attachment to home in an otherwise standard fiscal externality setting regional authorities may make interregional transfers in purchasing preferred populations however there is a range of distributions of resources over which neither region makes transfers nevertheless all equilibrium allocations resulting from the nash behavior of regional authorities including those that involve no transfers are efficient therefore in contrast to the standard conclusions of the fiscal externality literature there is no efficiency role for a central authority

a model of growth and migration this paper contains a model with which the desirability of persistent urbanization can be examined there are two regions city and countryside joint restrictions on the technologies in each region and on preferences over the goods produced in each region are the driving force of migration in equilibrium there is persistent migration from the countryside to the city even though there are externalities in production the competitive equilibrium is pareto optimal summary in fre excerpt

legal efficiency and consistency abstract we analyze the efficiency and consistency of court decisions under common and civil law as a leading example we study the enforcement of property rights judges are of two types some are conservative and follow the precedent or the statute while others maximize social welfare when courts intervene ex post after the relevant economic choices have been made welfare maximizing courts face a commitment problem such an ex post bias has implications on the relative consistency and efficiency of each legal system surprisingly we find that court decisions are more consistent under common law than under civil law the welfare comparison between the two systems is instead ambiguous however in changing economic environments common law is more likely to dominate civil law because of its greater adaptability

sectoral balance in development a survey abstract this paper surveys the literature on sectoral balance to see how sectoral imbalances can retard economic development it examines definitions of sectors and balance provides background facts theories and planning tools reviews the debate on balanced growth and surveys two sector models of agriculture industry consumption investment and luxury basics interaction the open economy and the role of service nonmarket and unproductive sectors it argues that the examination of important development issues requires multisectoral analysis incorporating the insights of several of these models and that alternative models with different structural characteristics deserve attention

political economy of redistribution it is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation we use a model of multilateral bargaining to demonstrate that this intuition may be flawed increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path the reason is the existence of two distinct mechanisms of property protection one is formal constraints that allow individuals or groups to block any redistribution that is not in their favor the other occurs in equilibrium where players without such powers protect each other from redistribution players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions in a stable allocation the society exhibits a class structure with class members having equal wealth and strategically protecting each other from redistribution

some instability puzzles in kaleckian models of growth and distribution a critical survey we tackle the issue of the possible instability of the kaleckian distribution and growth model distinguishing between keynesian and harrodian instability we review various mechanisms that have been proposed by critics of the kaleckian model to tame harrodian instability while bringing back the rate of utilisation to its normal rate we find that the mechanisms that have been suggested are far from convincing therefore we conclude that it may be premature for the critics of the kaleckian model to dismiss the endogeneity of the rate of capacity utilisation in long run growth equilibrium copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

monetary policy and macroeconomic stability under alternative demand regimes in this paper we analyse the interaction of macroeconomic activity and the dynamics of real wages from a theoretical perspective by means of a system dynamic approach we investigate the economic viability of wage and profit led demand regimes by analysing not only the effect of real wages on output but also the feedback mechanisms of macroeconomic activity on the real wages furthermore in this context we focus on the role of monetary policy as a macroeconomic stabilisation mechanism in the two mentioned demand regimes