Steady-State Growth and Distribution With an Endogenous Direction of Technical Change

Julius, A. J.

doi:10.1111/j.1467-999x.2005.00209.x

“…On the one hand, B ss is directly related to the long-run productivity growth, in turn an increasing function of the bargaining power of workers. On the other hand, long-run capital productivity is inversely related to the savings rate, as it is standard in similar models (van der Ploeg [21], Shah and Desai [25] Julius [15]). Since capitalists are the only savings class, and their income is inversely related to the workers' bargaining power, the higher η the lower the savings rate, hence the higher B ss .…”

Section: Proof We Havementioning

confidence: 88%

“…In endogenizing wages, thus linking them to labor productivity and the employment rate, the model produces considerable simplification in the dynamical description of the economy relative to the previous literature on the subject (Shah and Desai [25], van der Ploeg [21], Julius [15]), without neither altering the typical findings of Harrod-neutrality and constant input shares that characterize long-run patterns of technical change and income distribution, nor obliterating the conflictual features of income distribution between different classes.…”

Section: Discussionmentioning

confidence: 99%

“…3 Also, the employment rate, and therefore the labor share, are invariant with respect to the savings decisions made by capitalist households, as in Julius [15]. As for the local stability properties of the long-run equilibrium, we have the following proposition.…”

Section: Propositionmentioning

confidence: 93%

“…Goodwin's [11] model of class struggle, for instance, is built around an assumption linking wage growth with the employment rate as a proxy for workers' bargaining power. More recently, models of distribution and growth extending Goodwin's [11] analysis of growth cycles to include induced factor-augmenting technological change have been developed by Shah and Desai [25], van der Ploeg [21], and Julius [15]. All these models feature an exogenously determined wage and an underlying fixed-proportions economy.…”

mentioning

confidence: 99%

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Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)

Tavani

¹

2012

Structural Change and Economic Dynamics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargainingà la Nash [17]. As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy [14], and more recently Funk [10]). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States . Finally, institutional change, as captured by variations in workers' bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.------

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“…Notice that, as pointed out by Julius (2005), the labor share evolves so as to ensure a Harrod-neutral profile of technical change in the long run. Then, settingω = 0 in equation (16) and using (18) gives the following nullcline in the "Piketty plane" (B, φ):…”

Section: Steady State and Policymentioning

confidence: 99%

Income Shares, Secular Stagnation, and the Long-Run Distribution of Wealth

Petach

¹

,

Tavani

²

2018

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTFour alarming stylized facts have characterized the recent economic history of the United States: (i) a fall in labor productivity; (ii) a fall in the labor share, (iii) an increase in the capital income ratio, and (iv) an increase in the wealth share owned by top income earners. In this paper, we offer a non-Neoclassical explanation for these facts that merges the Pasinetti (1962) approach to differential saving propensities among classes with the theory of induced technical change (ITC) by Kennedy (1964). First, we provide a simple microeconomic rationale for workers' saving propensity being lower than capitalists' based on the empiricallysupported argument that consumption peer effects are more prevalent at lower brackets of the income distribution (Petach and Tavani, 2018). We then show that institutional changes that lower the labor share -a decline in unionization, an increase in monopsony power in the labor market, the so-called 'race to the bottom' fostered by a hyper-competitive global environment, or the exhaustion of path-breaking scientific discoveries as argued by Gordon (2015) -can explain the decline in labor productivity growth because of the reduced incentives to innovate to save on labor costs. Combined with ITC, differential savings delivers a direct relationship between the capitalist share of wealth and the capital-income ratio independent of the elasticity of substitution between capital and labor. Finally, we argue that these tendencies are not inevitable: tax policy can be used to implement any wealth distribution, similarly to Zamparelli (2016); while worker-crushing institutional arrangements can be reversed through counteracting policy changes. However, both policy changes appear unlikely given the current institutional and global climate. Abstract Four alarming stylized facts have characterized the recent economic history of the United States: (i) a fall in labor productivity; (ii) a fall in the labor share, (iii) an increase in the capitalincome ratio, and (iv) an increase in the wealth share owned by top income earners. In this paper, we offer a non-Neoclassical explanation for these facts that merges the Pasinetti (1962) approach to differential saving propensities among classes with the theory of induced technical change (ITC) by Kennedy (1964). First, we provide a simple microeconomic rationale for workers' saving propensity being lower than capitalists' based on the empirically-supporte...

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Endogenous Technical Change in Alternative Theories of Growth and Distribution

Tavani

¹

,

Zamparelli

²

2018

Analytical Political Economy

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This paper surveys the last two and a half decades of non-neoclassical literature on endogenous technical change and the factor distribution of income. The implications of classical-Marxian and post-Keynesian contributions are compared with neoclassical exogenous and endogenous growth theories. We find the comparison illuminating in several respects: despite the strong differences in the assumptions regarding the substitutability between capital and labor, the role of different classes in society, and whether or not productive factors are fully employed, the various alternative models can be classified in a way that highlights remarkable similarities with their neoclassical counterparts. Both neoclassical and alternative theories of endogenous growth: (i) have shown that long-run growth is sensitive to investment decisions; (ii) rely on a linear spillover from the stock of knowledge to the production of innovations, and (iii) match the Kaldor facts in the long run. The comparison allows to evaluate competing theories by looking at the different channels they emphasize: saving behavior and market structure in the neoclassical theories, as opposed to income distribution, the state of the labor market, and investors' behavior in alternative theories.

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Steady-State Growth and Distribution With an Endogenous Direction of Technical Change

Cited by 44 publications

References 26 publications

Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)

Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)

Income Shares, Secular Stagnation, and the Long-Run Distribution of Wealth

Endogenous Technical Change in Alternative Theories of Growth and Distribution

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