Log in

PKSG Working Paper Series

Working Paper PKWP1304

Income distribution and aggregate demand: A global Post-Keynesian model

April 2013

Özlem Onaran, Giorgos Galanis

This paper estimates the effects of a change in the wage share on growth at a national and global level in the G20 countries. A decrease in the wage share leads to lower growth in the euro area, Germany, France, Italy, UK, US, Japan, Turkey, and Korea, whereas it stimulates growth in Canada, Australia, Argentina, Mexico, China, India, and South Africa. However, a simultaneous decline in the wage share in all these countries leads to a decline in global growth. Furthermore, Canada, Argentina, Mexico, and India also contract when they decrease their wage-share along with their trading partners.

Keywords: Wage share, growth, global multiplier, consumption, investment, exports, imports, G20, developed and developing countries

JEL classification: E21: Macroeconomics: Consumption; Saving; Wealth E22: Investment; Capital; Intangible Capital; Capacity E25: Aggregate Factor Income Distribution F43: Economic Growth of Open Economies

Download: Working Paper PKWP1304

Policy Note