Secular stagnation: a Classical–Marxian view
Manuel David Cruz Boston University, Boston, MA, USA

Search for other papers by Manuel David Cruz in
Current site
Google Scholar
PubMed
Close
https://orcid.org/0000-0002-1232-5385
and
Daniele Tavani Colorado State University, Fort Collins, CO, USA

Search for other papers by Daniele Tavani in
Current site
Google Scholar
PubMed
Close
https://orcid.org/0000-0002-2757-0439
Restricted access

We study a model of secular stagnation, income and wealth distribution, and employment in the Classical–Marxian (CM) tradition, with the purpose of drawing a contrast with established Neoclassical accounts of the topic (, ). In these explanations, which assume full employment of labor at all times, an exogenous reduction in the growth rate g increases the difference with the endogenous rate of return to capital r. The capital–income ratio rises and, if the elasticity of substitution is above one, the wage share falls. Our explanation does not presuppose full employment, and features a crucial tension between profit-driven capital accumulation and wage-driven labor-augmenting technical change: both these features are defining for CM economics and have been emphasized in recent heterodox macro literature. Institutional or technological shocks that lower the wage share initially foster capital accumulation – which is profit-driven – and increase wealth inequality. However, the effect on long-run growth is negative, because a reduction in the wage share lessens the incentives by firms to introduce labor-saving innovation, which is wage-driven. The capital–income ratio must rise in order to restore balanced growth and stabilize employment in the long run; and the increase in wealth inequality is permanent. The ultimate effect on long-run employment depends on the relative strength of the response of technical change versus real wage growth to labor market institutions: we identify a simple condition that delivers either a wage-led or a profit-led long-run employment regime. We then test the model using time-series data for the US (1960–2019): impulse responses from vector error-correction model (VECM) estimators lend support to the main predictions of our model, and point to the employment–population ratio being wage-led.

Contributor Notes

53 Bay State Rd, Boston, MA 02215; email: manucruz@bu.edu.

Corresponding author: 1771 Campus Delivery, Fort Collins, CO 80523-1771; email: Daniele.Tavani@Colostate.edu.

You are not authenticated to view the full text of this chapter or article.

Access options

Get access to the full article by using one of the access options below.

Purchase

Pay to Access Content (PDF download and unlimited online access)

Other access options

Redeem Token

Institutional Login

Log in with Open Athens, Shibboleth, or your institutional credentials

Login via Institutional Access

Personal login

Log in with your Elgar Online account

Login with your Elgar account