Distributive Conflict, Investment, and Persistent Unemployment: Evidence from a Kaleckian Long-Memory Model — The Case of Germany (1990–2024)

This paper investigates the interplay between distributive conflict, investment dynamics, and persistent unemployment within a Kaleckian framework, emphasizing the long-memory properties of wages. We develop a stochastic model in which wages adjust adaptively to historical discrepancies between prices and wages, while investment is driven by expected profitability rather than market clearing. Applying this model to Germany over the period 1990–2024, we provide evidence that cumulative divergences between prices and wages generate persistent effects on real wages, aggregate demand, and employment. Our findings highlight that long-memory wage dynamics amplify the unemployment consequences of investment-driven accumulation, demonstrating a structural mechanism through which distributive conflict and inflation interact. The results underscore the importance of historical wage inertia and profit-led investment in shaping macroeconomic outcomes, offering new insights into the sources of persistent unemployment in advanced economies.