Inequality, non-linear consumption behaviour, and monetary growth imperatives

Anja Janischewski
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Anja Janischewski: N/A

European Journal of Economics and Economic Policies: Intervention, 2022, vol. 19, issue 1, 61-88

Abstract: The debate about monetary growth imperatives centres around the question of whether a zero-growth economy is compatible with positive interest rates. An aspect that is mostly disregarded in this debate is under which circumstances a zero-growth economy can be accompanied by a reduction in wealth inequality, which is a prerequisite for the latter to be politically feasible. The paper analyses this question using a stock–flow consistent macro model including multiple households with heterogeneous wealth levels and a non-linear, concave consumption function. The results show an example of theoretical conditions under which wealth inequality is reduced in a zero-growth economy. However, the conditions for stability of the zero-growth trajectory are found to be more restrictive in the case of a non-linear consumption function compared to the linear case.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:19:y:2022:i:1:p61-88

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