Abstract

This dissertation answers two basic questions: what are the effects of aggregate demand on the long-run level of economic activity, and how do exogenous changes in the bargaining power of workers affect macroeconomic performance? The first chapter, written with Steven Fazzari, extends a simple Keynesian growth model to show that demand shocks can have permanent effects on labor productivity and labor supply. Estimating the model on U.S. data, we find that positive demand shocks raise labor productivity persistently, implying that stronger demand increases the long-run level of economic activity. The second chapter shows that these results can be rationalized within a standard equilibrium framework, developing parsimonious assumptions on technology and preferences that deliver demand-led growth and provide microfoundations consistent with modern neoclassical macroeconomics. Within this framework, increases in the bargaining power of labor can stimulate output through their effects on aggregate demand, even when they raise labor costs. The final chapter identifies the effects of such bargaining shocks on output, unemployment, and the labor share by combining minimal theoretical structure with narrative evidence on changes in executive policy toward labor–capital conflict. I find that bargaining shocks are contractionary in the long run, account for a substantial share of output fluctuations at all horizons and are an important driver of recessions before the 1990s, and don’t account for the recent decline in the labor share. These results indicate that demand effects from income redistribution are small.

Committee Chair

Steven Fazzari

Committee Members

Costas Azariadis; Jake Rosenfeld; Martín García-Vázquez; Philipp Grübener

Degree

Doctor of Philosophy (PhD)

Author's Department

Economics

Author's School

Graduate School of Arts and Sciences

Document Type

Dissertation

Date of Award

5-29-2026

Language

English (en)

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Economics Commons

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