Abstract:

Abstract The aim of this article is to analyze the short-term impact of functional income distribution on aggregate demand and its components in South Korea within a post Keynesian framework, in which demand regime of an economy is either wage or profit-led. The article firstly portrays the structural change and the macroeconomic performance of South Korea, and then presents the evolution of the labor income share in the country. The article follows with the presentation of the theoretical model employed for the analysis of the demand regime in the country and offers a survey of the empirical literature of the post Keynesian models of income distribution and growth. Then takes place the econometric analysis and the article proceeds with the evaluation of the results and concludes. The econometric investigation shows that, over the period 1970–2011, the growth regime of the domestic economy is wage-led, while that of the total economy is profit-led. The results are partially in contradiction with those already found in the literature and point that pro-labor growth policies are not viable within the current structure of the South Korean economy in the short run.

Keywords: