Real Sector Imbalances and the Great Recession
New School for Social Research
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
Date posted: February 2, 2012