Wage-led or profit-led economic growth : the case of Chile 1996-2017
Tesis para optar al grado de Magíster en Análisis Económico
The main objective of this work is to estimate the effects of income redistribution on economic
growth in Chile with a post-Kaleckian/post-Keynesian approach. We analyze the period between
1996-2017, identifying the effect of an increase in the profit share on aggregate demand. We
seek to highlight the “forgotten” role of wages as a source of demand and try to understand the
macroeconomic effects of inequality such as its impact on achieving long-term economic growth.
Our main results show that an increase of 1%-point in the profit share will lead to a contraction
of 0.44% in aggregate demand, which indicates that Chilean economic growth is wage-led.
Furthermore, we use an innovative approach by testing whether economic growth is wage-led or
profit-led. Allowing for possible transformations from one regime to the other over the period
analyzed. The conclusions are that for a significant part of the period, economic growth in Chile
was wage-led. Which means that in such period an increase in the wage rate would cause faster
economic growth. In other words, improving income distribution would be consistent with faster