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Wage‐led versus profit‐led demand: a comprehensive empirical analysis

Wage‐led versus profit‐led demand: a comprehensive empirical analysis

Oyvat, Cem ORCID: 0000-0002-5097-0246, Öztunalı, Oğuz and Elgin, Ceyhun (2020) Wage‐led versus profit‐led demand: a comprehensive empirical analysis. Metroeconomica, 71 (3). pp. 458-486. ISSN 0026-1386 (Print), 1467-999X (Online) (doi:https://doi.org/10.1111/meca.12284)

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Abstract

This study investigates various economic factors’ impact in determining the relationship between functional income distribution and aggregate demand from both a theoretical and an empirical viewpoint. We base our analysis on a demand‐driven growth model for an open economy that allows for either profit‐led or wage‐led regimes. Our results strongly indicate that a higher level of trade openness is associated with a lower probability of being wage‐led. We find evidence that lower wage inequality makes an economy more wage‐led and that countries with a greater private credit‐to‐gross domestic product (GDP) ratio are more likely to be profit‐led.

Item Type: Article
Uncontrolled Keywords: demand, distribution, economic growth, Keynesian economics, trade openness
Subjects: H Social Sciences > H Social Sciences (General)
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 01 Jul 2020 10:29
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: REF 3
URI: http://gala.gre.ac.uk/id/eprint/27870

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