The Limits to Wage-Led Growth in a Low-Income Economy

Download or read book The Limits to Wage-Led Growth in a Low-Income Economy written by Arslan M. Razmi and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Neo-Kaleckian literature has actively debated whether growth is wage- or profit-led in capitalist economies. However, existing studies tend to ignore the non-tradable sector and heterogeneity within the tradable sector. This article shows that incorporating these features renders wage-led growth in an open developing economy unfeasible in the traditional (Kaleckian) sense of the term. This result - which follows even if one sets aside the competitiveness considerations generally seen as impeding such growth - occurs due to the presence of a homogeneous goods-producing tradable sector that sets the ceiling to steady-state growth. A corollary, in light of findings from the 'new new trade theory' literature, is that increasing South-South trade may tend to narrow room for wage-led growth regardless of the other desirable effects of higher wages.