2000/01/01 by Engelbert Stockhammer, Stockhammer, Engelbert
Economics, Econometrics and Finance · Social Sciences · #Economic Theory and Policy #Economic theories and models #Political Economy and Marxism
paper · doi:10.57938/93e78452-996f-4ea4-8e2d-f691a484dc5a
openalex publication_date 2000/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
Distinguishing between profit led and growth led demand regimes, we analyze the conditions of existence and stability of long run equilibrium of unemployment. The model we employ has at its center the relation between growth and distribution. Growth can be either wage led or profit led. Distribution itself is a function of the unemployment rate, with higher unemployment leading to a higher profit share. We use Okun's Law to close the model, making the change of the rate of unemployment a function of growth. The interesting result of our analysis is that in profit led demand regime the short run and long run equilibrium are stable. However, if the demand regime is wage led, the same conditions that guarantee stability of the goods market equilibrium in the short run render impossible the existence of a long run equilibrium rate of unemployment, and vice versa. Thus, if Kalecki's proposition that higher wages lead to higher growth is true, there will be no equilibrium rate of unemployment in the long run that serves as an anchor for the economic system. (author's abstract)