Classical and Keynesian models of inequality and stagnation

Cordina Rada, Daniele Tavani, Rudiger von Arnim and Luca Zamparelli
Additional contact information
Cordina Rada: University of Utah
Rudiger von Arnim: University of Utah

No 83-2022, FMM Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This paper studies two formal models of long run growth with a medium-run distributive cycle, both of which feature causal links from the rise in inequality to a deterioration of long run macroeconomic performance. Both versions feature an endogenous income-capital ratio: one through the Keynesian notion of effective demand, the other building on induced bias in technical change. A key focus of the analysis is on the assumptions necessary in both frameworks to generate policy implications consistent with the observed decline of the labor share, the income-capital ratio, and labor productivity growth during the neoliberal era. Importantly, both theories: (a) provide space for mutually reinforcing pro-labor and pro-growth policies in the long run, although they differ in the mechanisms at play in these processes; (b) imply a potential tradeoff between pro-labor policies and growth on one hand, and long-run employment on the other; (c) are consistent with the evidence on the distributive cycle at business cycle frequency.

Pages: 28 pages
Date: 2022
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Citations: View citations in EconPapers (1)

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http://www.boeckler.de/pdf/p_fmm_imk_wp_83_2022.pdf (application/pdf)

Related works:
Journal Article: Classical and Keynesian models of inequality and stagnation (2023)
Working Paper: Classical and Keynesian Models of Inequality and Stagnation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:imk:fmmpap:83-2022

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