On the possibility of an ever-increasing wealth concentration: Pasinetti, dual, and anti-dual equilibria in a Post-Keynesian framework

Stefan Ederer () and Miriam Rehm

No 112-2024, FMM Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This paper develops a stock-flow consistent Post-Keynesian model in the Kalecki-Steindl tradition with endogenous wealth accumulation and distribution, which captures the key aspects of the Cambridge debate on (anti-)dual and Pasinetti equilibria. We find that a stable interior solution – that is, a Pasinetti equilibrium – is the most likely outcome, while the corner solutions of dual and anti-dual equilibria – both the euthanasia and the triumph of the rentier – are special cases of a standard Bhaduri-Marglin model. Endogenizing the profit share yields a two-dimensional dynamic system of the wealth concentration and the profit share, which is stable for a wide range of parameter values, as long as the concentration of wealth is not unrealistically low. An interior Pasinetti equilibrium thus remains the most likely outcome. However, for certain parameter combinations, the system may move onto an explosive trajectory with an ever-rising concentration of wealth and income in the hands of capitalists. Numerically illustrating the results of the analytical model shows that endogenizing the profit share leads to a more unequal wealth distribution, and a negative feedback effect between high wealth inequality, a high profit share, and growth.

Keywords: Aggregate demand; autonomous spending; multiplier; profit share; wage-led demand; profit-led demand; monopoly capitalism; markup pricing; tax cuts; Michal Kalecki; Josef Steindl; economic stagnation, wealth distribution, Post-Keynesian model, aggregate demand, Pasinetti, profit rate (search for similar items in EconPapers)
JEL-codes: B22 D31 D33 E12 E21 E64 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2024
New Economics Papers: this item is included in nep-hme and nep-pke
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Working Paper: On the possibility of an ever-increasing wealth concentration: Pasinetti, dual, and anti-dual equilibria in a Post-Keynesian framework (2024)
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