A Neoclassical Kaldor Model of Real Wage Declines

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 13.07.2004, 12:15 - 13:30


Presentation by 

Michael Sattinger (University at Albany, SUNY)


A model linking macroeconomic equilibrium and income distribution in balanced growth equilibria is developed as a variant to the Kaldor model of factor shares. It departs from the original Kaldor model in assuming equal saving rates and a neoclassical production function. Macroeconomic equilibrium (national savings equal to investment) combines with competitive microeconomic behavior to determine the real wage and real interest rate. An increase in the ratio of national debt to labour reduces the real wage, explaining recent declines.

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