Distributional Regimes in the US — The Pasinetti Index and the Monetary Policy Effects on Income Distribution

Pedro Hugo Clavijo Cortes, Sylvio Antonio Kappes and Louis-Philippe Rochon

Review of Political Economy, 2025, vol. 37, issue 3, 734-755

Abstract: Policymakers and mainstream economists have expressed concerns over the distributional impacts of monetary policy following the emergence of so-called Unconventional Monetary Policies after the subprime crisis. This topic, however, is not new for post-Keynesianism. This paper focuses on the post-Keynesian idea of the Pasinetti Index. After an incursion into the history of this idea, the paper presents an econometric analysis of the relationship between the index, functional income distribution, and aggregate demand for the US from 1968 to 2022, using a threshold vector autoregressive model. The results indicate that the US economy has experienced different distributive regimes associated with changes in monetary policy. As a result, the economy has shifted from the Keynesian era to a more uncertain period, in which monetary policy is employed to protect the income and wealth of rentiers. Moreover, the work also shows that switches to a rentier-biased regime are highly detrimental to aggregate demand and functional income distribution.

Date: 2025
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DOI: 10.1080/09538259.2025.2495711

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