The dynamics of inequalities and unequal exchange of labor in intertemporal linear economies

Abstract

Introducing a concept of fairness of economic allocations, namely exploitation as the unequal exchange of labor (henceforth, UE exploitation) by generalizing Roemer's [51, 52] seminal model, this paper aims to answer the following two questions in the context of an intertemporal economy with linear technology: How is income and wealth inequality related (or unrelated) to the existence and persistence of UE exploitation? What are the mechanisms driving the persistent existence of UE exploitation in growing economies? Agents are UE exploited (resp. exploiters) if the amount of labor that they contribute to the economy is smaller (resp. bigger) than the amount of labor 'received' by them via their income. It is proved, first, that UE exploitation is monotonically correlated to functional income inequality. Second, it is shown that, unless agents discount the future, asset inequalities are necessary, but not sufficient for the persistence of UE exploitation, and the capital accumulation leading to the disappearance of UE exploitation cannot be ruled out in equilibrium. Third, it is shown that, regardless of whether agents discount the future, labor-saving technical progress may yield sustained growth with persistent UE exploitation by keeping labor abundant relative to capital, which restrains wages from rising. Unlike in models with differentiable production functions, this mechanism does not rely on changes in the marginal productivity of inputs and it is entirely driven by the interaction between innovation and labor markets.

Exploring the concepts of decent work through the lens of SDG 8: addressing challenges and inadequacies

“…A closer look into market economic systems shows a paradox at the heart of economic development. While purely market-based labor markets promote economic progress and innovation, they also encourage income inequality, job insecurity, and exploitation ( Wray, 2009 ; Galanis et al, 2017 ; He, 2022 ). Because of this dichotomy, economic policy must be complex.…”

The Phenomenon of Labor Exploitation: a Systematic Literature Review

“…From the results of the Scopus database in Figure 3, it can be seen that the top 10 authors have the most research. In this case, there is one of them, namely the author who has the most research results among the others, namely Veneziani, R in one of his studies entitled "The dynamics of inequalities and unequal exchange of labor in intertemporal linear economies" examines how exploitation and inequality are balanced in an accumulation economy with a diverse workforce (Galanis et al, 2019).…”