Pro-shareholder income distribution, debt accumulation, and cyclical fluctuations in a post-Keynesian model with labor supply constraints*

I develop a New Keynesian model in which a type of government multiplier doubles when unemployment rises from 5 percent to 8 percent. This multiplier indicates the additional number of workers employed when one worker is hired in the public sector. Graphically, in equilibrium, an upward-sloping quasi-labor supply intersects a downward-sloping labor demand in a (employment, labor market tightness) plane. Increasing public employment stimulates labor demand, which increases tightness and therefore crowds out private employment. Critically, the quasi-labor supply is convex. Hence, when labor demand is depressed and unemployment is high, the increase in tightness and resulting crowding-out are small. (JEL E12, E24, E32, E62)

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A NOTE ON PROGRESSIVE TAXATION, NOMINAL-WAGE RIGIDITY, AND BUSINESS CYCLE DESTABILIZATION

Macroeconomic Dynamics ◽

10.1017/s1365100519000579 ◽

2019 ◽

pp. 1-14

Author(s):

Miroslav Gabrovski ◽

Jang-Ting Guo

Keyword(s):

Business Cycle ◽

New Keynesian ◽

Wage Rigidity ◽

Nominal Wage ◽

Progressive Taxation ◽

Equilibrium Degree ◽

Tax Progressivity ◽

Cyclical Fluctuations ◽

Keynesian Model ◽

Nominal Wage Rigidity

In the context of a prototypical New Keynesian model, this paper examines the theoretical interrelations between two tractable formulations of progressive taxation on labor income versus (i) the equilibrium degree of nominal-wage rigidity as well as (ii) the resulting volatilities of hours worked and output in response to a monetary shock. In sharp contrast to the traditional stabilization view, we analytically show that linearly progressive taxation always operates like an automatic destabilizer which leads to higher cyclical fluctuations within the macroeconomy. We also obtain the same business cycle destabilization result under continuously progressive taxation if the initial degree of tax progressivity is sufficiently low.

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Remittances from Labor Migration: Evaluations, Performance and Implications

International Migration Review ◽

10.1177/019791838902300306 ◽

1989 ◽

Vol 23 (3) ◽

pp. 500-525 ◽

Cited By ~ 23

Author(s):

Charles B. Keely ◽

Bao Nga Tran

Keyword(s):

Quality Of Life ◽

Income Distribution ◽

Labor Supply ◽

Economic Performance ◽

Labor Migration ◽

Market Forces ◽

Economic Decline ◽

Effective Response ◽

Positive View

Two evaluative views of worker remittances draw opposite conclusions. The negative one posits that remittances increase dependency, contribute to economic and political instability and development distortion, and lead to economic decline that overshadows a temporary advantage for a fortunate few. The positive view sees remittances as an effective response to market forces, providing a transition to an otherwise unsustainable development. They improve income distribution and quality of life beyond what other available development approaches could deliver. The implications are tested for labor supply countries to Europe and to the Middle East. The implications of the negative view are not supported. Although the dire predictions of the pessimistic view have not materialized, the converse — contributions of remittances to economic performance — should not be overstated due to lack of data.

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