Wealth inequality and aggregate demand

Stefan Ederer and Miriam Rehm

No 30, Ecological Economic Papers from WU Vienna University of Economics and Business

Abstract: The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch - in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time.

Keywords: Wealth; Distribution; Aggregate Demand (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-gro and nep-pke
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Wealth inequality and aggregate demand (2021)
Working Paper: Wealth inequality and aggregate demand (2019)
Working Paper: Wealth inequality and aggregate demand (2019)
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