February 28, 2015

Real wages: toward an explanation

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


For the explanation of real wage development, a theoretical underpinning is needed. Wikimedia AXEC44 is the correct formula to start with

The average real wage in the consumption good industry depends on productivity R, the expenditure ratio (ρE>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