Do the Economic Policies of Japan's "New Form of Capitalism" Create a Virtuous Cycle of Growth and Distribution?

Sasaki, Hiroaki and Mizutani, Aya (2024): Do the Economic Policies of Japan's "New Form of Capitalism" Create a Virtuous Cycle of Growth and Distribution?

Abstract

In contemporary Japan, the realization of a virtuous cycle of growth and distribution (i.e., how the "new form of capitalism" should be) has been discussed. To examine the validity of economic policies suggested by the new form of capitalism, we present a Kaleckian model that considers the wage gap among workers and the retained earnings of firms, and investigate the effects of minimum wage, the rate of retained earnings, and profit sharing on growth and distribution. We reveal that a decrease in the rate of retained earnings and an increase in profit sharing do not lead to a virtuous cycle of growth and distribution, whereas a rise in the minimum wage increases the income share of workers and the economic growth rate. However, an increase in the minimum wage has a negative impact on employment, whereas a decline in the rate of retained earnings and an expansion of profit sharing have a positive effect.

• Item Type: MPRA Paper
• Language: English
• Keywords: growth and distribution; Kaleckian model; minimum wage; retained earnings; profit sharing; Japan's new form of capitalism
• 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; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J53 - Labor-Management Relations ; Industrial Jurisprudence

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