Income Redistribution Policy, Growth, Inequality, and Employment: A Long-Run Kaleckian Approach

Hiroaki Sasaki and Ryunosuke Sonoda

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates how the income redistribution policy affects economic growth, employment, income distribution, income inequality, and asset inequality. The income redistribution policy is defined as one that imposes capital taxation on capitalists and redistributes it to workers. Therefore, we constructed a Kaleckian model in which, in addition to capitalists, workers own capital stock through savings. Depending on the relative size of workers' and capitalists' saving rates, we obtained the Pasinetti equilibrium, in which both classes coexist, and the dual equilibrium, in which only workers own capital stock, whereas capitalists do not. In the Pasinetti equilibrium, raising the tax rate for capitalists drives an increase in workers' assets and income shares. Simultaneously, economic growth and employment rates increase when the short-run equilibrium is wage-led growth whereas they decrease when the short-run equilibrium is profit-led growth. Hence, the income redistribution policy is effective in reducing inequality and promoting economic growth and employment when the short-run equilibrium is wage-led.

Keywords: workers' saving; income equality; income redistribution policy; growth; employment (search for similar items in EconPapers)
JEL-codes: E11 E12 E64 J31 J53 (search for similar items in EconPapers)
Date: 2024-09-10
New Economics Papers: this item is included in nep-gro, nep-hme, nep-lma and nep-pke
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