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Technical Change and a Falling Wage Share if Profits are Maintained
Author(s) -
Franke Reiner
Publication year - 1999
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.00061
Subject(s) - economics , rate of profit , wage share , wage , technical change , profit (economics) , falling (accident) , labour economics , capital (architecture) , wage rate , microeconomics , econometrics , efficiency wage , macroeconomics , medicine , history , environmental health , archaeology , productivity
In the framework of a multi‐sectoral and fixed‐coefficients Leontief model with capital stock matrix B , the paper addresses the issue of the impact of technical change on income distribution. Comparing two steady‐state positions, it is shown that with cost‐reducing, capital‐using and (uniformly) labour‐saving technical change the equilibrium rate of profit will fall, if it is the aggregate wage share which remains fixed, not the absolute level of the real wage. Conversely, the wage share falls if the profit rate does not change. The reactions are ambiguous if, instead of the coefficients of the matrix B , the coefficients of the input–output matrix A increase.