Real Sector Imbalances and the Great Recession

Mark Setterfield

New School for Social Research; Trinity College

January 2012

Trinity College Economics Working Paper No. 12-01

While much attention has been focused on the financial woes of the US economy in the wake of the Great Recession, this chapter focuses on an important real sector imbalance: the failure of real wages to keep pace with productivity growth over the past three decades. This imbalance is shown to create a structural flaw in the aggregate demand generating process that threatens to undermine future macroeconomic performance. The chapter reflects on the policy responses necessary to remedy this situation, and the likelihood that the US will succeed in avoiding a future of secular stagnation.

Number of Pages in PDF File: 22

Keywords: Real wage growth, productivity growth, aggregate demand, household debt, Great Recession

JEL Classification: E21, E24, E25, E61, E66

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Date posted: February 2, 2012  

Suggested Citation

Setterfield , Mark, Real Sector Imbalances and the Great Recession (January 2012). Trinity College Economics Working Paper No. 12-01. Available at SSRN: http://ssrn.com/abstract=1997519 or http://dx.doi.org/10.2139/ssrn.1997519

Contact Information

Mark Setterfield (Contact Author)
New School for Social Research ( email )
6 East 16th Street
New York, NY 10003
United States
Trinity College ( email )
300 Summit Street
Department of Economics
Hartford, CT 06106
United States
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