Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102971
Authors: 
Hartwig, Jochen
Year of Publication: 
2014
Series/Report no.: 
KOF Working Papers, KOF Swiss Economic Institute, ETH Zurich 355
Abstract: 
Keynes's essay "Relative Movements of Real Wages and Output" is widely believed to be an important amendment to his General Theory because, in this essay, Keynes relaxed his core assumption of decreasing marginal returns to labour. Non-decreasing marginal returns, however, do not sit comfortably with the prime innovation of the General Theory: the Principle of Effective Demand. This will be demonstrated by performing - for the first time in the literature - numerical simulations with Keynes's Aggregate-Demand-Aggregate-Supply (D/Z) model. The view that Keynes's 1939 essay constitutes an important amendment to his General Theory thus has to be put into perspective.
Subjects: 
Keynes
effective demand
D/Z model
marginal returns to labour
JEL: 
B31
E12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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