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Wages, income distribution and economic growth in Scandinavia

Author

Listed:
  • Eric Bengtsson
  • Engelbert Stockhammer

    (King’s College London)

Abstract
Wage restraint plays an important role in the conventional economic history explanation of the post-war golden growth experience of industrialized economies. Conversely, wage increases harming investment and increasing unemployment have been proffered as explanations for some of the high unemployment during the interwar period. This article argues that the conventional account implicitly only considers effects of wage growth on investment and not the advantageous effects on consumption. Thus, the evaluation of the effects on GDP growth is lop-sided. We employ a Post-Keynesian model to estimate effects of growth in the wage share of national income on consumption, investment, exports and imports separately, and weigh the effects together to estimate total effects on GDP growth, in Scandinavia (Denmark, Norway and Sweden) 1900–2010. Furthermore, we estimate the positive effects of wage pressure on productivity, showing it to be significant and positive in all three countries. We show that the postwar wage push had small positive effects on GDP growth in Denmark and Sweden, and a small negative effect in Norway. Thus, wage restraint is not a valid explanation for the postwar growth miracle. We propose a more comprehensive macroeconomic framework for understanding the implications of labour-capital distribution.

Suggested Citation

  • Eric Bengtsson & Engelbert Stockhammer, 2018. "Wages, income distribution and economic growth in Scandinavia," Working Papers PKWP1811, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp1811
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    File URL: https://www.postkeynesian.net/downloads/working-papers/PKWP1811.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Bengtsson, Erik, 2019. "The Origins of the Swedish Wage Bargaining Model," Lund Papers in Economic History 195, Lund University, Department of Economic History.

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    More about this item

    Keywords

    functional income distribution; inequality; consumption; investment; Scandinavia; Bhaduri-Marglin model; economic history;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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