Abstract:
The main purpose of this paper is to test the hypothesis that, especially in
Europe, excessive real wage growth and falling profit shares have been
instrumental in reducing investment growth and the employment potential of the
capital stock. We also consider the policy implication that a sustainable rise
in employment may not be feasible unless higher output growth is led by
investment and that this in turn requires continued or even further wage
restraint.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS or its member central banks.