A neo-Kaleckian model of capital accumulation, income distribution and financial fragility

Rafael Ribeiro () and Alex Palludeto

Economia, 2016, vol. 17, issue 3, 279_290

Abstract: This paper develops a neo-Kaleckian dynamicalmodel that investigates how an increased financial instability affectsthe investment rate and the wage share of income in the long run. It is shown that a rising benchmark interest rate affects negatively the capital accumulation and the wage share of income. The main argument is developed in two-steps. First, it is build a two-dimensional model to analyse the stability conditions of the dynamical interaction between wage share and capital accumulation, given a constant debtcapital ratio. Second, by allowing endogenous variations of the debt of firms as a proportion of their capital stock, the extended model explores the stability conditions of the steady-state equilibrium solution in a three-dimensional dynamic system. In doing so, this paper contributes to the literature by setting the conditions in which the debt-capital ratio, the income distribution and the process of capital accumulation can be simultaneously stable in the long run

Keywords: Capital accumulation; Increasing risk; Income distribution; Financial instability (search for similar items in EconPapers)
JEL-codes: C62 D33 E12 E22 E44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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