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Wages, Income Distribution and Economic Growth: Long-Run Perspectives in Scandinavia, 1900–2010

Research output: Contribution to journalArticlepeer-review

Erik Bengtsson, Engelbert Stockhammer

Original languageEnglish
Pages (from-to)725-745
Number of pages21
JournalReview of Political Economy
Volume33
Issue number4
DOIs
Accepted/In press2021
Published2021

Bibliographical note

Funding Information: This paper was written as part of the ?Income distribution, asset prices and aggregate demand formation 1850?2010: A post-Keynesian approach to historical macroeconomic data? project, financed by the Institute for New Economic Thinking (2015?2018) [grant number: INO1500007]. This paper has been presented at Kingston University in the UK and Lund University in Sweden; thanks to all the participants and to Erik Hegelund for helpful comments. Thank you to two anonymous referees and the editor, Louis-Philippe Rochon, for constructive suggestions that helped to improve the paper. Publisher Copyright: © 2021 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.

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Abstract

This article views analysis of the influence of capital–labour income distribution on economic growth from a historical perspective, using data from 1900 onwards. We study the three Scandinavian countries of Sweden, Denmark and Norway, where conventional accounts of the postwar growth miracles in these small, open economies have emphasized the role of wage restraint, favouring profits and investment over consumption. Instead, we show that the 1950s and 1960s saw growing wage shares, and use the Bhaduri–Marglin model to econometrically analyse the effects on consumption, investment, exports and imports and the total effects on GDP. Furthermore, we estimate the effects of wage pressure on labour productivity. Growing wage shares have had a small positive effect on GDP growth in Sweden, Denmark and Norway, and the positive effect was larger in the postwar period than in other times. However, the positive growth effects of wage pressure were modest as the demand was only weakly wage-led. In contrast, supply side effects were large. Labour productivity was stimulated by vigorous wage increases, as argued by the Swedish Rehn–Meidner model as well as by post-Keynesian economists. The present investigation opens several further avenues for research on the distribution–growth nexus.

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