There is power in general equilibrium

TL;DR

This paper introduces a comprehensive general equilibrium model emphasizing power relations to analyze unemployment, income distribution, and profitability, integrating technological and institutional factors to explain US economic structural changes.

Contribution

It provides a unified framework linking power dynamics with economic variables, advancing understanding of how institutions and technology jointly influence the economy.

Findings

Power relations significantly affect unemployment and income distribution.

Technological and institutional changes jointly explain US economic structural shifts.

The model accurately captures the behavior of labor share, unemployment, and profitability.

Abstract

The article develops a general equilibrium model where power relations are central in the determination of unemployment, profitability, and income distribution. The paper contributes to the market forces versus institutions debate by providing a unified model capable of identifying key interrelations between technical and institutional changes in the economy. Empirically, the model is used to gauge the relative roles of technology and institutions in the behavior of the labor share, the unemployment rate, the capital-output ratio, and business profitability and demonstrates how they complement each other in providing an adequate narrative to the structural changes of the US economy.