Labour Values, Prices of Production and the Effects of Income Distribution: Evidence from the Greek Economy

Abstract

This paper explores the relationship between labour values, prices of production and changes in income distribution in an actual economy. For this purpose we use a linear model of production with circulating capital and homogeneous labour, assuming that wages are paid ex ante. On the basis of this model and data from input–output tables of the Greek economy for the period 1988–1997 we estimate the labour values and prices of production, which are normalized with the use of the Sraffian standard commodity and the actual output vector. Furthermore, we extend Steedman's polynomial approximation of prices of production to include the case where wages are paid ex ante and the accuracy of this approximation is tested with actual input–output data. Finally, we find that prices of production change as a result of hypothetical changes in income distribution more often than not in a monotonic way and in a few cases display curvatures that reverse the order between prices of production and values.