Labour market institutions and capitalist development: an Agent Based-Stock Flow Consistent approach from a Comparative Political Economy and post-Keynesian perspective

This thesis examines the effect on the wage share, employment and the dividend-wage ratio from bargaining power of labour under two ideal-types of capitalism. These ideal types represent the fordist regime or wage society and the post-fordist regime of finance-dominated capitalism or finance society. The effect from bargaining power is analysed by studying different bargaining strategies, linked with rates of profits, productivity and firms' leverage position, with varying degrees of bargaining power when wage formation is negotiated collectively and individually. The effect is simulated in an Agent Based-Stock Flow Consistent (AB-SFC) macroeconomic model which is based on benchmark models by Caiani et al. (2016) and Dosi et al. (2010; 2018). The developed model extends these models with more detailed elaboration of the wage formation process under two regimes in which banks may and may not ration new credit to firms. These models show how the AB-SFC method can be applied to combine economic theory and economic institutional analysis, and how this approach provides a laboratory in which the institutional configuration can be amended. The thesis suggests one possible combination of Comparative Political Economy (CPE) and macroeconomics, exemplified by the combination of post-Keynesian economics and CPE. The thesis argues that the AB-SFC approach, founded on a balance sheet and flow-of-funds approach, is more flexible than other macroeconomic modelling approaches. The effect on the wage share, employment and the dividend-wage ratio from bargaining power is affected by the institutional configuration and the results indicate that institutions may have profound effects on economic relations. However, the model simulations show that institutions are not the driving forces in the economy, but facilitators or mediators. Hence, demand factors are more important for macroeconomic outcomes per se. The results contribute to the understanding of the law of motion in capitalist economies with respect to the role of institutions. The use of ideal types illuminates mechanisms and qualitative effects in the simulations, enabling a robust analysis of wage formation under and wage society and finance society.