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Inequality, Debt Servicing, and the Sustainability of Steady State Growth

Mark Setterfield (), Yk Kim and Jeremy Rees ()
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Jeremy Rees: Department of Economics, Trinity College

No 1404, Working Papers from New School for Social Research, Department of Economics

Abstract: We investigate the claim that the way in which debtor households service their debts matters for macroeconomic performance. A standard Kaleckian growth model is modified to incorporate working households who borrow to finance consumption that is determined, in part, by the desire to emulate the consumption patterns of more affluent households. The impact of this behavior on the sustainability of the growth process is then studied by means of a numerical analysis that captures various dimensions of income inequality. When compared to previous contributions to the literature, our results show that the way in which debtor households service their debt has both quantitative and qualitative effects on the economy’s macrodynamics.

Keywords: Consumer debt; emulation; income distribution; Golden Age regime; Neoliberal regime; expenditure cascades; growth (search for similar items in EconPapers)
JEL-codes: E12 E44 O41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-12
New Economics Papers: this item is included in nep-gro, nep-mac and nep-pke
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http://www.economicpolicyresearch.org/econ/2014/NSSR_WP_042014.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Inequality, Debt Servicing and the Sustainability of Steady State Growth (2016) Downloads
Working Paper: Inequality, Debt Servicing, and the Sustainability of Steady State Growth (2015) Downloads
Working Paper: Inequality, Debt Servicing, and the Sustainability of Steady State Growth (2014) Downloads
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