Social Conflict and the Effectiveness of Aggregate Demand Management Policies

This article examines the role of social conflict in explaining macroeconomic phenomena and, especially, the effectiveness of aggregate demand policies as a means of raising real output. The social conflict approach is compared with a traditional Keynesian view along with Ball, Mankiw, and Romer's and Lucas's models of the determinants of the effectiveness of aggregate demand policies. Empirical analysis during the period from the 1950s to the 1990s for fifteen OECD countries provides significant evidence that the social conflict view of inflation has much to offer in explaining differences in the effectiveness of aggregate demand policies both across countries and through time.