Search

• We examine the relationship between unemployment and the dynamics of the adjusted wage share in the private sector of the economy. • We extend Shaikh's analysis to eight mature economies in addition to the US. • We provide empirical evidence on the role of labour market slack in the process of labour share erosion. • We do not find trace of a long-run tendency of the economy to return to a 'normal' or 'equilibrium' unemployment rate. After the 1980s, advanced capitalist economies witnessed a significant decline of the wage share in income. Along with the conventional view, which ascribes this decline to technological factors and international trade, another line of enquiry has endorsed a 'political economy' approach and identified several drivers of the wage share erosion. Yet, the role of persistent changes in unemployment has remained relatively unexplored. We try to fill this gap moving from a recent contribution by Anwar Shaikh, who analyzed the relation between unemployment and changes in income distribution in the US economy. We study this relationship by adopting a long-term approach, and two alternative measures of labor market slack. We extend Shaikh's method of analysis to eight mature economies, and we carry out the analysis using further econometric techniques. Results generally confirm the adverse impact of unemployment on the labor share, while do not support the notion of equilibrium unemployment. [ABSTRACT FROM AUTHOR]

The apparently never-ending phase of economic slowdown that advanced economies have been experiencing in recent decades has recently contributed to the resurrection of the hoary old argument of 'secular stagnation'. In this paper, situated intellectually within the strand of research documenting the negative impact on growth of inequality and financialization, we elaborate on the idea that such a prolonged period of stagnation is associated with a new paradigm of socio-economic policy, known as 'finance-dominated capitalism'. In this way, we distance ourselves from the mainstream 'secular stagnation' narrative, adopting instead a post-Keynesian perspective that allows us to discuss the links between financialization and inequality, on one hand, and economic performance, on the other. Then, we submit our arguments to empirical scrutiny by undertaking an econometric analysis of 21 OECD countries between 1990 and 2016. The evidence indicates that excessive levels of financialization, along with high inequality and weak labor market institutions, have a negative impact on real growth. Based on our findings, we propose possible demand-side policies, to be implemented through expansionary fiscal measures, which could help sustain GDP growth and employment in the current context of stagnation, mitigating income inequality and sustaining an inclusive recovery at the same time. [ABSTRACT FROM AUTHOR]