The conflict-closure paradox and economic growth stability

I examine why canonical conflicting-claims inflation models cannot generate partial or unilateral closure of aspiration gaps without money illusion—a property I call the conflict-closure paradox. Embedding goods-market equilibrium into the aspiration-gap framework resolves this paradox and produces a unique, inflation-free equilibrium real wage. A more detailed distributional-conflict model that incorporates three institutional regimes (pro-labor, pro-capital, and pro-conflict) and endogenous technical change shows that wage-led demand regimes are dynamically more robust across institutional settings than profit-led ones, because their stronger demand–productivity feedbacks more reliably prevent prolonged wage–price spirals, especially in pro-conflict environments with full nominal flexibility.