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Wealth inequality and aggregate demand

Stefan Ederer and Miriam Rehm

No PKWP1918, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch – in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time.

Keywords: Wealth; Distribution; Aggregate Demand (search for similar items in EconPapers)
JEL-codes: D31 D33 E12 E21 E25 E64 (search for similar items in EconPapers)
Pages: 23
Date: 2019-10
New Economics Papers: this item is included in nep-gro, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
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http://www.postkeynesian.net/downloads/working-papers/PKWP1918.pdf First version, 2019 (application/pdf)

Related works:
Journal Article: Wealth inequality and aggregate demand (2021) Downloads
Working Paper: Wealth inequality and aggregate demand (2019) Downloads
Working Paper: Wealth inequality and aggregate demand (2019) Downloads
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