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In a recession or depression Kaldor argued that prices should fall faster than wages for the same reasons that Keynes laid out in his General Theory. [10] This meant that income would be redistributed to workers as real wages rose.
Kaldor assumes that when I > S, the growth of demand under increased employment will result in faster growth of prices than of wages, thereby changing the distribution of income in favour of profit earners reducing the share of workers.
But wages cannot rise as fast and as much as the rise in prices. The failure of money wages to keep pace with the rise in prices will reduce real income of wage earners and it will increase the profit margins of entrepreneurs.
A large fall in primary product prices tends to retard industrial growth by slashing the purchasing power of primary producers over industrial products. But a large rise in primary product prices does not have symmetrical benefits for industry, since it tends to push up industrial wages and prices, and provokes governments to deflate.
Feb 21, 2017 · Convinced of the importance of cost-push inflation, in which the rate of increase of money wages played a central role, Kaldor argued that a national wages policy was essential to maintain price stability under conditions of full employment.
- John E. King
- J.King@latrobe.edu.au
- 2017
Oct 15, 2019 · Since the growth facts involve prices, it is natural to focus on a competitive equilibrium of the one-sector growth model. Let p t denote the price of output in period t in current dollars and w t and r t denote the prices of labor and capital, respectively, in period t in terms of units of output.
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Nov 25, 2021 · It could be argued that causation is from fast productivity growth to fast output growth because faster productivity growth causes demand to expand faster than through relative price movement. On this view, all productivity growth would be autonomous.
