No. 86. INCOME DISTRIBUTION AND AGGREGATE DEMAND: A THEORETICAL AND EMPIRICAL INVESTIGATION USING DATA FROM THE GREEK ECONOMY, 1960–2017 (IN GREEK)
Em. G. Marsellou 2025. | ISBN: 978-960-341-147-5 (Print) ISBN: 978-960-341-146-8 (Online)
This study offers an empirical investigation into the relationship between functional income distribution and aggregate demand growth in the Greek economy. It was prompted by the prolonged recession that followed the 2010 fiscal crisis and the subsequent fiscal adjustment policies, which highlighted the need to reassess this relationship and its implications for economic policymaking in Greece.
The analysis focuses on whether the Greek economy operates under a wage-led or profit-led demand regime. By employing a macro-econometric demand-led model and utilizing time-series econometric techniques for the period 1960–2017, the study estimates the effects of changes in income distribution on the main components of demand—consumption, investment, and net exports—and, by extension, on GDP. Robustness checks are also conducted across distinct sub-periods.
The findings clearly indicate that the Greek economy operates under a wage-led demand regime: increases in the wage share boost aggregate demand primarily through consumption, offsetting potential negative effects on investment and net exports. Accordingly, policies aimed at increasing the wage share, strengthening the welfare state, improving labor market institutions, and raising the minimum wage can act as catalysts for overcoming economic stagnation.
The study concludes that understanding the role of income distribution is critical for designing a sustainable productive model capable of meeting the challenges of a competitive and resilient economy. In this context, the European Union’s Recovery and Resilience Facility could serve as a key opportunity for the strategic reorientation of the Greek economy toward a more productive and balanced growth model.