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Financialization and its Long-run Macroeconomic Effects in a Kalecki-Minsky Model

Shinya Fujita and Hiroaki Sasaki ()

Discussion papers from Graduate School of Economics Project Center, Kyoto University

Abstract: One of the main characteristics of “financialization” is the redistribution of income in favor of shareholders, at the expense of workers. In this paper, we interpret pro-shareholder redistribution as a decrease in both retention ratio and wage share. Using both the Kaleckian macroeconomic model and the Minskyan taxonomy of finance regime, we investigate the long-run effects of such parametric changes on the rate of capital accumulation and the debt-capital ratio, on the one hand, and on the financial structures of firms, on the other. A decrease in the retention ratio leads to higher capital accumulation, but makes financial structures fragile. Moreover, a rise in profit share improves the financial position in the long run if the short-run equilibrium is profit-led growth regime; this is not necessarily so with wage-led growth.

Pages: 28 pages
Date: 2011-04
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