The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers

Parui, Pintu (2020): The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers.

Abstract

In a post-Keynesian growth model with two types of workers (blue and white-collar workers), an attempt is taken to understand changes in financial behaviour and income distribution and their macroeconomic causes and consequences. For a relatively strong speed of adjustment in the financial market and a relatively weak reserve army effect, a stable steady state is achieved in the wage-led demand regime. Unlike Sasaki et. al. (2013), an endogenous and perpetual business cycles may emerge even in the wage-led demand regime. For a relatively strong reserve army effect, a contraction in the wage gap between white and blue-collar employments can make the steady state unstable. On the contrary, in a profit-led demand regime, a rise in the wage gap can destabilize the economy. A rise in the saving propensity of rentiers (and capitalist) is detrimental to aggregate demand and worsens the income distribution. A more regulated labour market and a rise in unionization are desirable as these can mitigate income inequality.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financialization, Blue and white-collar workers, Wage gap, Post-Keynesian growth model, Limit cycles
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials

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