Full text: Wirtschaft und Gesellschaft - 2016 Heft 4 (4)

42. Jahrgang (2016), Heft 4

Wirtschaft und Gesellschaft

many studies in the mainstream economic tradition derives directly from
their theoretical approach. There are two critical assumptions in this framework: fully competitive markets and full-capacity utilisation. As soon as the
assumption of perfect competition is dropped, i. e. if firms and workers act
in oligopolistic markets as is mostly the case, relative bargaining power is
influenced by the price setting power (mark-up power) of firms.4 There is a
substantial literature in the New Keynesian tradition that derives from this.5
Empirically, this approach is most prominently represented by the International Monetary Fund (2007), the European Commission (2007), Bassanini and Manfredi (2012), and Karabarbounis and Neiman (2012). Indeed
their findings indicate that technological change is the primary determinant
of falling wage shares followed by globalisation. However, Stockhammer
(2015) argues that a close examination of the reported findings reveals serious robustness issues regarding the effects of technology. Indeed both
the IMF (2007) and the EC (2007) report that the technology variables are
not robust to the inclusion of time effects. However, they do not interpret
the non-robust effects of technology with caution, but rather make a strong
case that the fall in the wage share is an unavoidable outcome of technological progress.
Consistent with the nature of modern capitalist economies, the relaxation
of the assumption of full-capacity utilisation gave birth to Keynesian macroeconomics which emphasise the role of effective demand in determining
output, income and employment. Consequently, functional income distribution is governed by consumption of workers and capitalists and, more
importantly, by the propensity to invest which is driven by aggregate demand and business expectations, i. e. the animal spirits of the private investors.6 Most heterodox authors accept this analysis but augment the
emphasis on animal spirits by additional factors governing the balance of
power between employers and employees as suggested by Marxist or
Institutionalist economists. Technology might affect the contributions of
the factors of production but technological change itself is an endogenous
outcome of conflict in the labour process. Wages are negotiated between
employers and employees and are therefore subject to social norms and
relative bargaining power. Consequently scholars in this tradition have offered a more thorough analysis of the determinants of bargaining power.
Marxist economists emphasise the sphere of production as the source of
surplus and the core determinant of income distribution. Economists working in a post-Keynesian or Kaleckian tradition start directly from the assumption of oligopolistic markets and focus on the sphere of circulation.
They emphasise the degree of monopoly in a market, which is determined by the degree of competition between firms, union power and, in a
more recent interpretation of the literature by the strength of the financial
sector.7
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