An Empirical Characterization of Redistribution Shocks and Output Dynamics
By: Stehrer, Robert.
Contributor(s): Hauzenberger, Klemens.
Material type: BookSeries: wiiw Working Papers: 68Publisher: Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2010Description: 47 S., 6 Tables and 4 Figures, 30cm.Subject(s): redistribution | structural VECM | joint estimation of cointegrating rank and multiple break datesCountries covered: Canada | USAwiiw Research Areas: Macroeconomic Analysis and PolicyClassification: C32 | C53 | E12 | E25 Online resources: Click here to access online Summary: What are the economic effects of redistributing one dollar from profits to labour income? We address this question for the post-World War II economies of the United States and Canada within a structural VECM procedure allowing for up to two breaks of unknown timing. In the United States the short-run spending effect on growth, set in motion by higher labour income, is strong enough to make such a redistribution an attractive, maybe provocative, policy alternative. Across the border in Canada, however, the negative medium-run capacity effect, brought about by diminished profits, dominates the picture more or less from the beginning and output slumps considerably, a result actually suggesting a - maybe even more provocative - redistribution towards profits. We discuss several possible explanations such as the formation of expectations and the different exposure to international trade. Methodologically, we provide a novel procedure to estimate cointegrating rank and break dates jointly.Item type | Current library | Call number | Status | Date due | Barcode | |
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Paper | WIIW Library | 5.700/68 (Browse shelf(Opens below)) | Available | 1000010002185 |
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What are the economic effects of redistributing one dollar from profits to labour income? We address this question for the post-World War II economies of the United States and Canada within a structural VECM procedure allowing for up to two breaks of unknown timing. In the United States the short-run spending effect on growth, set in motion by higher labour income, is strong enough to make such a redistribution an attractive, maybe provocative, policy alternative. Across the border in Canada, however, the negative medium-run capacity effect, brought about by diminished profits, dominates the picture more or less from the beginning and output slumps considerably, a result actually suggesting a - maybe even more provocative - redistribution towards profits. We discuss several possible explanations such as the formation of expectations and the different exposure to international trade. Methodologically, we provide a novel procedure to estimate cointegrating rank and break dates jointly.