Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238639 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 949
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
This paper extends the empirical stock-flow consistent (SFC) literature through the introduction of distributional features and labor market institutions in a Godley-type empirical SFC model. In particular, labor market institutions, such as the minimum wage and the collective bargaining coverage rate, are considered as determinants of the wage share and, in turn, of the distribution of national income. Thereby, the model is able to examine both the medium-term stability conditions of the economy via the evolution of the sectoral financial balances and the implications of functional income distribution on the growth prospects of the economy at hand. The model is then applied to the Greek economy. The empirical results indicate that the Greek economy has a significant structural competitiveness deficit, while the institutional regime is likely debt-led. The policies implemented in the context of the economic adjustment programs were highly inappropriate, triggering private sector insolvency. A minimum wage increase is projected to have a positive impact on output growth and employment. However, policies that would enhance the productive sector's structural competitiveness are required in order to ensure the growth prospects of the Greek economy.
Subjects: 
Stock-Flow Consistent
Labor Market Institutions
Internal Devaluation
Functional Income Distribution
Greece
JEL: 
E25
F47
J08
Document Type: 
Working Paper

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