Wages and economic growth: foundations of the structuralist approach in a neoclassical model

Abstract

A neoclassical growth model with failure in the labor market and positive externalities
accruing from rising capital intensity is presented. This model is used to support
the structuralist hypothesis that rising real wages may have a positive effect on GDP growth.
The model also challenges the orthodox conclusion that higher propensity to save necessarily
leads to higher rates of GDP growth.

JEL Classification: O41; O15.