Is aggregate demand wage-led or profit-led? National and global effects

Abstract

Estimates the effects of a change in the wage share on growth in the G20 countries using a post-Keynesian/post-Kaleckian model. Analyses the interanctions among different economies, and calculates the global multiplier effects of a simultaneous decline in the wage share. Suggests that at the national level, a decrease in the wage share leads to lower growth in the euro area, Germany, France, Italy, Uk, Us, Japan, Turkey, and Korea, i.e these economies are wage-led, whereas it stimulates growth in Canada, Australia, Argentina, Mexico, China, India, and South Africa, thus the latter group of countries are profit-led.