Monday, January 6, 2014

Arslan Razmi on South-South trade and the limits to wage-led growth

Another presentation from the same session at the ASSA in Philadelphia. Arslan extends (Power Point here) the so-called Neo-Kaleckian model to show that destination of exports matter. He suggested that in this kind of model the limit to wage-led growth does not come from the conventional negative effect of wages on external competitiveness (real exchange rate appreciation, as in Robert Blecker's famous 1989 paper), but as the result of the negative effect of higher wages on capacity utilization and investment in the "homogenous" good sector (tradable, but price taking sector that he suggests might characterize South-South trade).

1 comment:

  1. Just for clarification, and understanding, isn't the suggestion of a negative effect of higher wages on capacity utilization and investment in the homogenous goods sector a modified balassa-samuelson model argument?

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