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Debt-driven growth? Wealth, distribution and demand in OECD countries

Engelbert Stockhammer () and Rafael Wildauer ()

No 18278, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: The paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components. We extend the Bhaduri and Marglin (1990) model to include personal income inequality as well as asset prices and debt. This allows for an evaluation of the wage or profit-led nature of demand regimes, of the expenditure cascade argument (Frank et al. 2010) and several hypotheses regarding the effects of wealth and debt. Our estimates are based on a panel of 18 OECD countries covering the period 1980-2013. For the full panel the average demand regime is found to be wage led. We fail to find effects of personal inequality, but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis.

Keywords: post-Keynesian economics; wage-led growth; Bhaduri-Marglin model; demand regimes; wealth effect; Veb (search for similar items in EconPapers)
Date: 2015-11-27
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Published in Cambridge Journal of Economics 6.40(2015): pp. 1609-1634

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Related works:
Journal Article: Debt-driven growth? Wealth, distribution and demand in OECD countries (2016) Downloads
Working Paper: Debt-driven growth? Wealth, distribution and demand in OECD countries (2015) Downloads
Working Paper: Debt-driven growth? Wealth, distribution and demand in OECD countries (2015) Downloads
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