A global race to the bottom: The neo-Goodwinian aggregative-systems estimation of income distribution and capacity utilization interactions
DOI:
https://doi.org/10.13133/2037-3643/18186Keywords:
Panel Data Analysis, Post-Keynesian Economics, Neo-Goodwinian Model, Distributive-Demand Dynamics, GlobalizationAbstract
The neoliberal reforms since the 1980s have resulted in rapid globalization paralleled by worsening income distribution. In this paper, I first show that most countries worldwide (58 of 81) have experienced a decline in the labor share of income, or the wage share, during 1950-2019. Second, I estimate the demand and distributive regimes from 81-country panel data based on the neo-Goodwinian model. At the global level, the short-run estimation shows that the distributive regime appears to be Marxian/profit-squeeze and the demand regime exhibits profit-led. I further separate the estimation into two groups: advanced and developing countries. The estimation still confirms the profit-led/profit-squeeze regimes in both groups, even though the demand and distributive regimes are stronger in advanced economies. In the long run, the results reveal a global race to the bottom: a decline in the long-run wage share. Neither positive nor negative gain is founded on capacity utilization in advanced and developing countries.
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