In reading several macro textbooks, it seems that most of the supply-side policies tend to be focused on the labour supply side (wage setting curve), instead on the firm/labour demand side(price setting curve).

In most textbooks, this whole section is devoted to training programmes, wage accords, income policies, the degree of 'coordination' in unions of the economy, etc.

Almost very few pages,or paragraphs, are dedicated to price-push factors, for the exception of the usual chapter on the oil shocks in the late 70's, which can be seen as labour productivity shock. Almost nothing is said about improving competition, and whatever else can be considered as price-push factor.

Why is that? I maybe wrong, though.

Some may say that there's no too much stress, since the relevant policies are already studied in the field of Industrial Organization. However, my reply to this, is that there's also a field called Labour Economics where many of the effects of the policies for the WS curve are studied, and yet macro textbooks still cover them. Hence, there's clearly an unbalanced exposition in most macro textbooks...


1 Answer 1


I think it depends on the category of literature you're reading. The category of innovation literature has a lot about supply-side cost changes, and about related policies - you'll find lots of work on learning curves, technology diffusion, harnessing economies of scale. Frank Geels of Manchester does a lot of work on the theoretical side of this.

And there's broader literature on industrial policy and regulation too.

  • $\begingroup$ Could you please expand a bit on what you understand as «innovation literature»? I've never come across that expression. The usual IO subject - if I remember correctly - is analysed in a more micro perspective, i.e., no macro conclusions are taken. It would really be interesting to understand if what happens in particular markets, also happens at the aggregate/macro level(for output, etc). Thanks $\endgroup$ May 4, 2016 at 20:48
  • $\begingroup$ @Anoldmaninthesea. I'm afraid that's about as much about it as I know. I think you're right that there's more on the micro than the macro; I suspect that's because whether things work or not at the macro level, is all about the detail of the interventions, which can be quite sector-specific. $\endgroup$
    – 410 gone
    May 5, 2016 at 7:19
  • $\begingroup$ I was rereading your answer, and I remembered... There's also a field called Labour economics where many of the effects of the policies for the WS curve are studied. Meanwhile, even if there's the subject of Industrial Organization, those subjects are never very stressed in macroeconomics textbooks... $\endgroup$ Aug 2, 2016 at 17:58

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