Income Distribution and Household Debt Dynamics under Kaleckian Pricing

Houssam Boughabi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops and empirically evaluates a Kaleckian framework linking income distribution, mark-up pricing, and household consumption dynamics in selected Eurozone economies. Within the Kaleckian tradition, real wages are structurally determined by distributive conflict through the mark-up, implying that shifts toward profits may compress purchasing power and alter aggregate demand. The analysis addresses two central questions: whether variations in the mark-up are reflected in real wage dynamics consistent with Kaleckian pricing, and whether households smooth consumption through borrowing in response to distributive pressures. Using annual data for Germany, France, Italy, and the Netherlands over the period 1980–2025, the results reveal substantial cross-country heterogeneity in real wage developments, providing only partial support for a uniform mark-up compression mechanism. Real consumption exhibits significant persistence in Germany and the Netherlands, with the estimated parameter approaching unity, consistent with martingale-like smoothing and strong path dependence. However, the borrowing channel does not emerge as statistically robust across countries, suggesting that debt does not systematically function as a long-run stabilizing device for demand. The findings therefore support the relevance of Kaleckian distributional dynamics and consumption inertia while offering limited empirical confirmation for sustained debt-led stabilization in the selected Eurozone economies.

Keywords: Kaleckian pricing; Distributive conflict; Debt-financed consumption; Consumption smoothing; Financial fragility (search for similar items in EconPapers)
JEL-codes: D33 E12 E25 E31 E44 (search for similar items in EconPapers)
Date: 2026-03-18
New Economics Papers: this item is included in nep-pke
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/128395/1/MPRA_paper_128395.pdf original version (application/pdf)

Related works:
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:pra:mprapa:128395

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().