Income distribution, inequality and debt

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Chapter 13 in Income Distribution, Growth and Unemployment, 2022, pp 184-199 from Edward Elgar Publishing

Abstract: This Chapter modifies the role of unemployment in the consumption function that was considered in Chapter 10. In fact, while in that Chapter unemployment was considered a macro indicator of inequality depressing consumption, in the present Chapter inequality, by means of a Veblen effect, stimulates debt in order to keep up with the riches. This model tries to catch the "zeitgeist" of the Great Recession, where the presence of this effect along with the existence of evolutionary forces, has transformed consumption into the driver of the system, given a permissive banking system. Analyzed within a regime-switching methodology, this model is capable not only of generating complex dynamics but to shed new light on the income distribution debate (IDD). In this case, it becomes even more clear-cut that the nature of the income distribution loop may change according to the length of period considered.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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