Thrift, stagnation and wealth distribution in a two class economy with applications to the United States

Rishabh Kumar ()
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Rishabh Kumar: Department of Economics, New School for Social Research

No 1506, Working Papers from New School for Social Research, Department of Economics

Abstract: A two class (rentiers and workers) model of growth and distri- bution is applied to the study of long run stagnation in aggregate demand. The theoretical framework shows the same forces which lead to concentration of wealth and income amongst the class of rentiers, also constrain the aggregate economy's output capital ratio in the long run. We conjecture that this model addresses the secular stagnation argument that has gained prominence recently. For the period 1979- 2010, we find the US economy represents the kind of stylized economy which would be prone to falling output capital ratios due to increased savings rate differentials in its income and wealth ranking. A first approximation suggests the long decline in the rate of saving in the US maybe a consequence of a distributional paradox of thrift.

Keywords: Distribution; Economic Growth; Stagnation; Paradox of Thrift (search for similar items in EconPapers)
JEL-codes: D3 E21 O4 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2015-03, Revised 2015-07
New Economics Papers: this item is included in nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1506

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