Abstract:

In this study, we present an empirical investigation into demand and distribution dynamics using structural vector autoregression analysis for Turkey between the period 1970-2017. The theoretical analysis is based on a Kaleckian dynamic macro model where distributive shares are determined endogenously by introducing Rowthorn’s conflicting claims on income by workers and firms and labor productivity is allowed to vary with the level of capacity utilization due to economies of scale due to Kaldor–Verdoorn effects and wage-push effects according to Marx. Our findings indicate that increases in wage share lead to an increase in accumulation and growth which suggests wage-led effective demand, while distributive dynamics demonstrate profit-squeeze results, at least in the short run. Moreover, the empirical model confirms most of the typical Kaleckian results.

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