Back to the Surplus: An Unorthodox Neoclassical Model of Growth, Distribution and Unemployment with Technical Change

TL;DR

This paper presents a neoclassical growth model incorporating institutions, automation, and income distribution, offering new insights into macroeconomic trends by linking profit dynamics with labor institutions and technological change.

Contribution

It introduces an unorthodox neoclassical model that integrates institutional factors and automation to explain income distribution, unemployment, and growth in the US economy.

Findings

Joint variations in labor institutions and technology explain income shares and unemployment.

The model links profit capacity with political environment and labor institutions.

Recent macroeconomic trends can be understood through this interrelation.

Abstract

The article examines how institutions, automation, unemployment and income distribution interact in the context of a neoclassical growth model where profits are interpreted as a surplus over costs of production. Adjusting the model to the experience of the US economy, I show that joint variations in labor institutions and technology are required to provide reasonable explanations for the behavior of income shares, capital returns, unemployment, and the big ratios in macroeconomics. The model offers new perspectives on recent trends by showing that they can be analyzed by the interrelation between the profit-making capacity of capitalist economies and the political environment determining labor institutions.