KEYNES' WAGE–PRICE DYNAMICS

The paper presents a simple loglinear macroeconomic model designed to discuss the essentials of Keynes' dynamic analysis in the General Theory and in the Treatise on Money. The model has a conventional static Aggregate Demand—Aggregate Supply block plus a three‐dimensional dynamic system involving the money wage and the expected level and rate of change of the output price. It illustrates Keynes' ideas, in particular on the nature of unemployment and on the stabilizing nature of money (as opposed to real) wage stickiness. It also allows to reconcile with empirical observations Keynes' (false) conjecture on the negative correlation of money and real wages.     

Does global value chain engagement improve firms' wages: Evidence from China

Better understanding of the effect of the global value chain (GVC) on wages is a key issue for determining welfare gains from engagement in international integration. We study whether and how China's engagement in the GVC enhances firms' wage by using firm‐level and customs transaction‐level data covering the period 2000–06 with the methods of propensity score matching (PSM), difference in differences (DID) and generalised propensity score (GPS). The empirical results show that first, GVC engagement can improve firms' wage. Second, the improvement effect is more prominent in capital‐intensive and foreign‐invested enterprises. Third, the degree of embedment in the GVC shows a U‐shaped relationship with wages (the marginal improvement changes from decreasing to increasing). Finally, by analysing the mechanism, we find that participation in the GVC ultimately improves the overall wage level of enterprises through the productivity effect and the reallocation effect of labour demand.     

POST‐KEYNESIAN EFFECTIVE DEMAND AND CAPITAL–LABOUR SUBSTITUTION

This paper analyses the relationship between the real wage rate and employment when we induce capital–labour substitution within a Post‐Keynesian Kaleckian model. To avoid the over‐determinacy problem, we consider a non‐homogeneous production function and cost minimization, in contrast to recent work that assumed a homogeneous production function and profit maximization. As a result, we find not only that increasing returns to scale are important in sustaining the long‐run stability condition, but also that if the increasing returns to scale are small, then it is more likely that employment will increase.     

WAGE POLICY IN AN OPEN‐ECONOMY KALECKI–KALDOR MODEL: A SIMULATION STUDY

This paper discusses a Post‐Keynesian model of income, production and trade. The one‐country, one‐sector model features Kaleckian investment demand, Kaldorian productivity and a labor market module based on a wage–price spiral. The model is first presented for a closed economy with exogenous real wages; second, for a closed economy with endogenous real wages; third, for an economy open to trade with endogenous real wages. Simulations with different calibrations show key characteristics of the model. Monte Carlo simulations over reasonable parameter ranges shed some light on the effectiveness of wage policies in open economies.     

THE PROFIT–INVESTMENT–UNEMPLOYMENT NEXUS AND CAPACITY UTILIZATION IN A STOCK‐FLOW CONSISTENT MODEL

This paper studies under which conditions the share of profit in value‐added, financial constraints on investment and capital shortage may foster unemployment and may limit the growth of capital and/or the growth of aggregate demand, in a stock‐flow consistent model. The efficiency of demand‐side versus supply‐side economic policies (decrease of the real interest rate and/or of the real wage, increase of the leverage ceiling constraint) depends on capital shortage and credit rationing, which are not necessarily simultaneous due to the effects of investment on aggregate demand and supply.     

SHAPE OF WAGE–PROFIT CURVES IN JOINT PRODUCTION SYSTEMS: EVIDENCE FROM THE SUPPLY AND USE TABLES OF THE FINNISH ECONOMY

This paper extends the empirical investigation of the shape of wage–profit curves to the case of joint production using data from the Supply and Use Tables of the Finnish economy (for the years 1995 through 2004). It is found that (i) the considered systems do not have the usual properties of single‐product systems, and (ii) the monotonicity of the wage–profit curves depends on the adopted normalization condition.     

Norm Bounds and A Homographic Approximation for the Wage–Profit Curve

This paper provides lower and upper norm bounds for the wage–profit curve in linear single‐product systems. Thus, it also constructs an algebraically simple (i.e. homographic) and empirically powerful approximation to that curve. The results finally suggest that actual economies tend to behave as ‘corn‐tractor’ systems with respect to the shape of the wage–profit curve and, at the same time, behave as three‐industry systems with respect to the shape of the production price–profit rate curves.     

Balance‐of‐payments‐constrained cyclical growth with distributive class conflicts and productivity dynamics

This study builds a dynamic balance‐of‐payments‐constrained model that incorporates the endogenous determination of the economic growth rate, conflictive wage/price distribution and employment rate. The wages, commodity prices and employment rate are determined by the profit squeeze effect and labour‐saving technical change. The relative strength of these two effects generates different outcomes for the transitional dynamics and comparative statics analysis. Particularly, the model shows stability, instability and cyclical nature, the latter of which concurs with the evidence reported by previous empirical studies.     

Technical Change and the Equilibrium Profit Rate in a Market with Sequential Bargaining

The Marxian theory of the tendentially falling rate of profit is shown to be consistent with a competitive equilibrium scenario for labor markets in which wages are determined by sequential bargaining within a stationary matching process. The central result establishes that if trade is possible, there exists a set of individually rational capital-using, labor-saving technical innovations which lower the equilibrium rate of profit if adopted universally. The model yields as an important special case wage conditions under which the universal adoption of any such innovation reduces the equilibrium rate of profit.     

Redistribution in a Neo‐Kaleckian Two‐country Model

We investigate the interaction between demand‐driven growth and income distribution in open economies, by combining expenditure‐switching and demand spillover effects in a neo‐Kaleckian two country model. First, we specify elasticities of wage share and real exchange rate to the money wage relative to labor productivity, in order to precisely describe the distributive pass‐through from money wages to the labor share and the real exchange rate. Second, we analyze the demand effects of an increase in the money wage for given labor productivity (a redistribution towards labor) in both Home and Foreign country, as well as globally. We derive closed form results for two identical countries. These results indicate that redistribution towards labor at Home: (i) always increases growth globally if Home is wage‐led, but can lead to lower growth at Home relative to Foreign; and (ii) will always imply lower growth at Home relative to Foreign if Home is profit‐led, but can still be growth‐enhancing at Home. Thus, to the extent that countries are concerned with their relative economic performance, a fallacy of composition can emerge. Numerical simulations suggest that these fallacies could indeed occur. As a consequence, ‘returns to coordination’ over international labor policies might be substantial.     

Multi Fibre Arrangement and Wage Inequality: Firm and State‐level Evidence from India and a Theoretical Model

The phased elimination of Multi Fibre Arrangements (MFA) for textile and apparel has been one of the most compelling trade policy reforms that removed a system of bilateral quotas. The reform brought in significant changes in the industrial structures for exporters from the south, including India. Has the labour‐intensive high‐employment textile and clothing industry in India benefited from this global move towards freer trade? For India, the industry has witnessed unprecedented market concentration of export‐oriented firms. Firm‐level empirical estimate illustrates that workers in the export‐oriented firms in India are adversely affected due to withdrawal of quota. Accumulation of net fixed assets and growth of sales impart positive impact on firm‐level wages that cannot outweigh negative impact due to fall in exports. We also find negative impact of profit on aggregate wage bill for the industry with firms spread over 11 major states in India. We show that the mean deviation of industry‐level wage is positively and significantly associated with mean deviation of the number of factories at the state level and negatively with profit. Finally, a brief analytical exercise obtains conditions under which joint withdrawal of quota and import tariff could raise the aggregate labour income in developing countries, in general.     

Globalisation and Inter‐occupational Inequality: Empirical Evidence from OECD Countries

How does globalisation affect inter‐occupational wage inequality within countries? This paper examines this by focusing on two dimensions of globalisation: openness to trade and openness to capital flows, using a relatively new data set on occupational wages. Estimates from a dynamic model for 15 OECD countries spanning the period 1983–2003 suggest that increased openness increases occupational wage inequality in poorer OECD countries as predicted by the Heckscher–Ohlin–Samuelson model, but for the more advanced OECD countries, we find no significant effect. The absence of the expected result for the latter category can be due to a rapid increase in the supply of skilled labour, to outsourcing of skilled jobs or because changes in the trade flows are too small to have any significant effect in those countries.     

The Limits to Wage‐Led Growth in A Low‐Income Economy

Neo‐Kaleckian literature has actively debated whether growth is wage‐ or profit‐led in capitalist economies. However, existing studies tend to ignore the non‐tradable sector and heterogeneity within the tradable sector. This article shows that incorporating these features renders wage‐led growth in an open developing economy unfeasible in the traditional (Kaleckian) sense of the term. This result—which follows even if one sets aside the competitiveness considerations generally seen as impeding such growth—occurs due to the presence of a homogeneous goods‐producing tradable sector that sets the ceiling to steady‐state growth. A corollary, in light of findings from the ‘new new trade theory’ literature, is that increasing South‐South trade may tend to narrow room for wage‐led growth regardless of the other desirable effects of higher wages.     

Conspicuous Consumption,Inequality and Debt: The Nature of Consumption‐driven Profit‐led Regimes

This paper extends the theoretical concept of wage‐led and profit‐led demand regimes by incorporating relative consumption concerns. Specifically, it integrates the Veblenian concept of conspicuous consumption into the Bhaduri–Marglin model by assuming that relative consumption concerns matter primarily within the working class. If in such a framework the profit share increases and the corresponding decrease in workers' income is distributed unevenly, efforts to ‘keep up with the Joneses’ may increase consumption and, hence, lead to a consumption‐driven profit‐led regime.     

The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle

Germany is the laggard of Europe, yet the country is world champion in merchandise exports. The paper tries to solve this theoretical and empirical puzzle by diagnosing a ‘pathological export boom’ and a ‘bazaar effect’. Excessively high wages defended by unions and the welfare state against the forces of international low‐wage competition destroy too big a fraction of the labour‐intensive sectors and drive too much capital and labour into the capital‐intensive export sectors, causing both unemployment and excessive value added in exports. Moreover, excessive wages induce too much outsourcing of upstream production activities, which implies that export quantities grow too much in relation to value added contained in exports. Finally, excessive wages cause capital flight resulting in a too large current account surplus.     

国际贸易、租金分享和工资水平——基于浙江制造业的实证研究

本文在工资决定的租金分享谈判框架下,利用浙江省2004年的经济普查数据,研究了国际贸易、企业盈利能力对制造业企业工资水平的决定效应。研究发现,资本方和劳动方之间存在明显的租金分享机制,企业盈利能力的增加会导致制造业从业人员收入的提升;尽管出口贸易没能提升企业的盈利能力,但出口贸易可增强劳动方在租金分享中的谈判能力,最终提升工资水平。最后,本文在租金分享谈判框架下讨论了工资差异问题,并得出结论认为,当前的国际贸易模式不会导致工资差异的扩大,但是产业管制政策和外商直接投资有导致工资差异进一步扩大的可能性。     

Long‐period Positions in Multi‐sectoral Cobb–Douglas Economies

The present paper considers a constant returns to scale non‐joint production economy with one primary factor (labour). It follows from the non‐substitution theorem that macroeconomic variables are completely determined by the wage–profit distribution in a long‐period position. We investigate the special case in which production in each sector as well as consumption are characterized by means of Cobb–Douglas functions. Despite the non‐linearity, this parametrization allows us to compute sectoral and macroeconomic variables in simple and intuitive equations. As noted in earlier literature, many variables behave differently than would be expected on basis of a one‐sectoral Solow growth model.     

Mind the Gender Wage Gap – the Impact of Trade and Competition on Sectoral Wage Differences

This paper examines differences between women’s and men’s wages in 18 selected OECD countries in the period 1970 to 2005. The study is based on 12 manufacturing sector‐ and skill‐specific sets of panel data on the gender wage gap. We apply a system generalised method of moments (GMM) estimator to the extended version of the conditional gender wage gap convergence equation, controlling for sector concentration and industry‐specific measures of openness using a difference‐in‐difference approach: trade‐affected concentrated sectors versus trade‐affected competitive sectors. The results indicate that: (i) an increase in sector concentration is associated with wage gap growth; (ii) both import and export penetration are associated with a reduction of the high‐skill gender wage gap growth in concentrated industries; (iii) there is evidence of a widening impact of trade on the medium and low‐skill occupational gender wage gap growth in less competitive industries; (iv) institutional regulations of the labour market have an impact on the development of the gender wage gap: for highly‐skilled labour an increase in labour market regulation raises the growth of the gender wage gap, while for medium‐ and low‐skilled workers, it lowers it.     

A Sraffian (no) trade‐off between autonomous demand and transfer payments

This paper explores the matrix demand multiplier in Sraffian frameworks and shows that it involves an autonomous demand‐transfer payments curve, which exhibits formal similarities with the well‐known consumption (wage)‐growth (profit) curve in steady‐state capital and growth theory.     

SCALE‐INDEPENDENT TECHNOLOGICAL‐KNOWLEDGE BIAS,HUMAN‐CAPITAL ACCUMULATION AND GENDER INEQUALITY

We present a dynamic, non‐scale general‐equilibrium model with female and male human capital where Schumpeterian R&D and human‐capital accumulation are the engines of growth and gender wage inequality. Gender wage inequality is encouraged by changes in relative supply and relative demand of both human‐capital types. Relative supply restricts the levels of employed human capital. Relative demand is affected by the technological‐knowledge bias, which is driven by the price channel and is affected by human‐capital accumulation. In particular, the female‐premium per unit of human capital and per worker increases when the observed discrimination against women decreases or is removed.