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Engelbert Stockhammer and Ozlem Onaran

emerges from this literature is that, in addition to financial reform, there needs to be a change in distributional policy and wage policy if a viable growth regime is to be established. This paper contributes to this strand of the literature by clarifying the concept of wage-led growth, both as an analytical concept and as an economic policy strategy. To that end we survey a large post-Keynesian (or neo-Kaleckian) literature 1 and, in particular, we build on the recent project New Perspectives on Economic Growth, commissioned by the ILO. 2 The Kaleckian tradition in

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J.E. King

1 INTRODUCTION In recent years macroeconomists working in the Post-Keynesian tradition have developed elaborate and convincing models of wage-led growth. Drawing on the earlier work of Michał Kalecki, theorists such as Eckhard Hein, Özlem Onaran and Engelbert Stockhammer have demonstrated that, under plausible values of the relevant parameters, an increase in real wages will generate higher (not lower) effective demand and will therefore contribute to faster (not slower) rates of output growth. At the same time, but independently, Institutionalist labour

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Peter Skott

receiving greater attention throughout the profession. To their great credit the post-Keynesian and neo-Marxian traditions have always emphasized distributional issues. The forms, however, that this attention have taken may not be the most productive. In the post-Keynesian tradition the concepts of wage- and profit-led growth have dominated the discussion. The concepts are defined with reference to the properties of aggregate demand, and countless contributions have elaborated ways in which the functional distribution of income could affect the different components of

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Esteban Pérez Caldentey and Matías Vernengo

1 INTRODUCTION Within the post-Keynesian approach to economic growth, two distinct families of models have matured, drawing their basic inspiration from either Nicholas Kaldor or Michal Kalecki and Joan Robinson. 1 A fundamental difference between these families of models lies in their treatment of investment. Some of the modern Kaleckian–Robinsonian models, following Amit Bhaduri and Stephen Marglin, 2 assume that, besides capacity utilization, investment is affected by the profit share, and, on this basis, make the case for a profit-led rather than a wage-led

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Jaime Ros

1 INTRODUCTION This paper investigates the conditions under which wage-led and profit-led growth can take place in a small open developing economy. The analysis presented has two main features. A common adaptation of the tradables/non-tradables model to the conditions of developing countries assumes a modern, capital-intensive tradables sector and a labor-intensive traditional or non-capitalist sector in the non-tradables activities (see, for example, Ros and Skott 1998 ; Razmi et al. 2012 ). Since the tradable goods sector, as in the original dependent economy

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Özlem Onaran

effects with the negative effects on consumption. Demand plays a central role in determining growth, and functional income distribution between wages and profits has a crucial effect on demand. The total effect of the decrease in the wage share on aggregate demand of the private sector (households and firms) depends on the relative size of the reactions of consumption, private investment and net exports to changes in income distribution. If the total effect is negative, the demand regime is called wage-led; otherwise the regime is profit-led. Theoretically, both are

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Mark Setterfield

2015 marked the 25th anniversary of the publication of ‘Unemployment and the real wage: the economic basis for contesting political ideologies’ by Amit Bhaduri and Stephen Marglin and its companion piece, ‘Profit squeeze and Keynesian theory’ ( Bhaduri and Marglin 1990 ; Marglin and Bhaduri 1990 ). The publication of these articles has since given rise to a large and still-expanding literature in Keynesian macrodynamics devoted to exploring (both theoretically and empirically) whether and under what circumstances growth is either wage- or profit-led. In

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Mark Setterfield

The majority of the papers that comprise this third special issue of the Review of Keynesian Economics devoted to ‘Wage- versus profit-led growth after 25 years’ provide fresh ruminations on the core theme of the Bhaduri–Marglin model ( Bhaduri and Marglin 1990 ; Marglin and Bhaduri 1990 ): the relationship between growth and distribution. This relationship is of longstanding interest to Keynesians. In the Cambridge growth models of the mid-twentieth century associated with, inter alia , Robinson, Kaldor, and Pasinetti, 1 the distribution of income is

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Mark Setterfield

The contributions to this second in the series of special issues of the Review of Keynesian Economics devoted to ‘Wage- versus profit-led growth after 25 years’ are marked by efforts to extend the basic theory of distribution and growth found in Bhaduri and Marglin (1990) and Marglin and Bhaduri (1990) . These extensions incorporate additional insights – concerning financial dynamics, household behaviour and technical change – that are not found in the original Bhaduri–Marglin model. The latter focuses on the interaction of corporate and household behaviour

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Mark Setterfield

attention on wage- versus profit-led growth, suggesting either that such emphasis is unjustified (Skott), or that it is typically contextualized within the wrong theoretical framework (Pérez Caldentey and Vernengo). Both Bhaduri and Raghavendra and Marglin, meanwhile, identify and rectify omissions in their earlier work. Taking Bhaduri and Marglin (1990) and Marglin and Bhaduri (1990) as their points of departure, they add analyses of the monetary and financial sectors (including, most notably, shadow banking activities) and distinctions between slow and fast wage