February 28, 2015

Real wages: toward an explanation

Comment on ‘Falling real wages in the USA 2007—2014’


For the explanation of the real wage development a theoretical underpinning is needed. This is the correct formula to start with.

The average real wage depends on productivity R, the expenditure ratio (rhoE>1 means overall credit expansion), the relative size of the investment good industry Li/Lc, and the ratio of distributed profit Yd to wage income.

For the analytical details see (2014).

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2014). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL