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This paper compares fully-funded (FF) and pay-as-you-go (paygo) pension plans in a Keynesian framework for an economy with overlapping generations and excess capacity. The model addresses both short/medium-run equilibria and steady-states. Income distribution and class conflict, two crucial aspects of the political economy of pensions, become multidimensional. In a fully-funded economy class conflict between capitalists and labor gets diffused in the short-run by retirees' own interest to maintain a high profit share. In the longrun capitalists recognize that they can control their net share of profits by controlling employment and therefore the number of future retirees through capital accumulation. An extension of the model can show that fiscal policy is not always helpful in a fully-funded economy. A pay-as-you-go economy maintains a closer resemblance to the classical story of class conflict over income distribution. This is because workers and retirees have their interests aligned with the wage share. In this case fiscal policy through spending can be effective without creating a debt problem.

We explore four decades of cyclical and long-run dynamics in income distribution and economic activity for a panel of thirteen OECD countries, as measured by the wage share and the output gap. When modeled as a Goodwin model, our results suggest that economic activity is weakly profit-led and that the wage share is pro-cyclical. Our estimated model is dynamically stable and has a long-run equilibrium in distributionutilization space. An extension of the model suggests that this equilibrium has been shifting south-west towards a lower wage share and a loss of economic activity. This finding is suggestive of a coordination failure among industrialized nations; it could be that the governments of these countries are engaging in a race to the bottom in terms of the wage share; it may even be that this race has the undesirable consequence of decreasing economic efficiency.

What options do the economic authorities in developing economies have for policy formation, at the macro and sectoral levels? Limits on policy maneuverability vary greatly across economies. In this chapter, we try to sort out the possibilities regarding macroeconomic regulation and then take up growth and sectoral policy in Chapter 8. We start by looking at how private and government net borrowing flows and current account balances interact in the short to medium run. Some algebraic back-up is provided in Appendix 7.1, which deals with gap models, relationships between flow and stock variables, and theories of the exchange rate. Macroeconomic policy packages appropriate to combinations of financial stages and binding gaps are reviewed. The discussion then turns to capital management techniques, including controlling international flows and regulating domestic financial markets, and central issues of financial development. The chapter closes with considerations regarding

This short and final empirical chapter looks at net lending flows – incomes minus expenditures – over time for the government, private, and rest of the world "institutional sectors", normalized in all cases by GDP. Long debates and many policy recommendations have followed from the interpretation of how net lending by different sectors relate to each other. We therefore review the conceptual debate first. This also serves as an introduction to the short-term macroeconomic analysis of Chapter 7.

Economic structuralists use a broad, systemwide approach to understanding development, and this textbook assumes a structuralist perspective in its investigation of why a host of developing countries have failed to grow at 2 percent or more since 1960. Sensitive to the wide range of factors that affect an economy's strength and stability, the authors identify the problems that have long frustrated growth in many parts of the developing world while suggesting new strategies and policies to help improve standards of living.After a survey of structuralist methods and post-World War II trends of g