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Structural Change and the Income Distribution: a Post-Keynesian disequilibrium model

Fabrizio Patriarca () and Francesco Vona ()

No 5, Working Papers - Dipartimento di Economia from Dipartimento di Economia, Sapienza University of Rome

Abstract: This paper extends the out-of-equilibrium literature to analyse a structural transition characterized by the emergence of a new sector that satisfies a want lower in the hierarchical scale. In particular, the dynamic interaction demand-supply can be a source of multiple long-run outcomes if both preferences and the technology evolve endogenously. It will be shown that a successful transition to a two-sector economy is ensured by a balanced distribution of innovative rents. Moreover, the full-employment region lies between two regions of classical and Keynesian unemployment, in contrast with the standard view of a negative relationship between real wages and employment. Finally, demand shortages, due to an unbalanced distribution, can bring about a long-run slump.

Keywords: Structural Change; Income Distribution; Unemployment; Innovation; Habit formation (search for similar items in EconPapers)
JEL-codes: E12 E24 O41 O43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-rmg
Date: 2009, Revised 2009
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Journal Article: Structural change and income distribution: An inverted-U relationship (2013) Downloads
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