Household Borrowing and the Possibility of “Consumption-Driven, Profit-Led Growth"

Mark Setterfield and Yk Kim

No 1601, Working Papers from New School for Social Research, Department of Economics

Abstract: We first show that, with a Kaleckian structure that is consistent with Pasinetti (1962), the relationship between distribution and growth is more robust than conventional wisdom suggests. Next, we extend our model by incorporating borrowing and emulation effects into workers' consumption behavior, under different assumptions about how debt is serviced. Our results demonstrate that borrowing and emulation transform the relationship between distribution and growth, giving rise to the possibility of a "consumption-driven, profit-led" growth regime (Kapeller and Schutz, 2015) and what we call the "paradox of inequality." A key conclusion is that the wage-or -profit led characteristics of the growth process, rather than being invariant, can be altered by social constructs such as borrowing and consumption norms that change over time.

Keywords: Borrowing; saving; emulation; debt servicing; wage-led growth; profit-led growth (search for similar items in EconPapers)
JEL-codes: E12 E44 O41 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2016-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.economicpolicyresearch.org/econ/2016/NSSR_WP_012016.pdf First version, 2016 (application/pdf)

Related works:
Journal Article: Household borrowing and the possibility of 'consumption-driven, profit-led growth' (2017)
Working Paper: Household Borrowing and the Possibility of Consumption- Driven, Profit-Led Growth (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1601

Access Statistics for this paper

More papers in Working Papers from New School for Social Research, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mark Setterfield ().