Table of Contents

Economic Crises and Policy Regimes

Economic Crises and Policy Regimes

The Dynamics of Policy Innovation and Paradigmatic Change

Edited by Hideko Magara

In this innovative book, Hideko Magara brings together an expert team to explore both the possibilities and difficulties of transitioning from a neoliberal policy regime to an alternative regime through drastic policy innovations. The authors argue that, for more than two decades, citizens in developed countries have witnessed massive job losses, lowered wages, slow economic growth and widening inequality under a neoliberal policy regime that has placed heavy constraints on policy choices.

Chapter 5: Varieties of economic growth regimes, types of macroeconomic policies and policy regimes: a post-Keynesian analysis

Hiroshi Nishi

Subjects: economics and finance, political economy, welfare economics, politics and public policy, political economy, public policy, social policy and sociology, economics of social policy

Extract

This chapter investigates the relationship between economic policy and macroeconomic performance. The purpose of the chapter is to contribute to current research on the policy regime from the viewpoint of post-Keynesian economics. The mechanisms of growth and business cycles have been revealed by post-Keynesian economics based on income distribution and finance. It has been almost fully shown that there are two types of growth and demand regimes, wage-led (stagnationist) and profit-led (exhilarationist). A wage-led growth regime (WLG) indicates an economy in which a rise in the profit share (a fall in the wage share) leads to a decrease in the rate of output growth, and a profit-led growth (PLG) regime indicates an economy in which a rise in the profit share leads to an increase in the rate of output growth. Representative theoretical analyses include Bhaduri and Marglin (1990), Blecker (2002) and Dutt (2012). Moreover, recent empirical studies include Stockhammer and Onaran (2004), Nishi (2011) and Storm and Naastepad (2012), which show that the income distribution- growth regime differs across countries and periods. Post-Keynesians have also examined macroeconomic performance in terms of the link between firm or government debt accumulation and economic growth. When increases in the debt-capital ratio and the interest rate lead to an increase in the rate of output growth, the economy is said to have a debt-led growth (DLG) regime.

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