chapter  7
Distributive cycles, business fluctuations and the wage-led/profit-led debate
Pages 22

In this context, the question is whether an increase in the real wage leads to a rise (via consumption increases) or to a decline (via lower investment) in the level of overall economic activity, or, in other words, whether the economy is primarily wage-led or profit-led. Following Bowles and Boyer (1995) and Gordon (1995), a large body of studies – see e.g. Stockhammer and Onaran (2004), Naastepad and Storm (2007), Stockhammer et al. (2009) and Hein and Vogel (2008) for important contributions along this line of research – has investigated this issue empirically, the majority of it by means of single-equation estimation techniques – see Hein and Vogel (2008) for a detailed overview of this literature.