Internal devaluation in a wage-led economyThe case of Spain
- Álvarez, Ignacio
- Uxó, Jorge
- Febrero, Eladio
ISSN: 2339-9570
Argitalpen urtea: 2017
Zenbakia: 5
Mota: Laneko dokumentua
Beste argitalpen batzuk: Documentos de trabajo = Working Papers ( Instituto Complutense de Estudios Internacionales ): Nueva época
Laburpena
The aim of this paper is to use the theoretical distinction between wage-led and profit-led economies to consider the impact of internal devaluation policy on GDP growth for the case of Spain. We assess to what extent wage devaluation in Spain has proven useful vis-à-vis triggering an exportled strategy, boosting aggregate demand and overcoming the crisis. For said purpose, we estimate a Bhaduri-Marglin model drawing on quarterly data from Eurostat, and we expand the traditional model to take into account the effect of private debt on consumption and investment. Our main conclusion is that the Spanish economy can be characterized as a wage-led economy, and that therefore a wage share decrease proves counterproductive to growth. According to our calculations, internal devaluation policy detracted an average of 0.3 percentage points of annual economic growth during the period 2010-2016.