Income Distribution, Consumer Debt, and Keeping Up with the Joneses: a Kaldor-Minsky-Veblen Model

Yk Kim and Soon Ryoo

No 1302, Working Papers from Trinity College, Department of Economics

Abstract: We extend Kaldor’s theory of income distribution to include workers’ debt accumulation and their motive to emulate rentiers’ consumption. Our results show that (i) the interaction between income distribution and emulation can produce instability, (ii) instability is more likely when the workers’ emulation motive is strong and bankers’ lending decisions are highly accommodating, and (iii) a plausible assumption on the nonlinearity of emulation behavior can generate a limit cycle by way of the Poincare- Bendixson theorem. Our analysis provides an alternative perspective on the secular increase in household indebtedness for the decades and the subsequent deleveraging process in the recent crisis.

Keywords: income distribution; consumer debt; emulation; instability; limit cycle (search for similar items in EconPapers)
JEL-codes: E12 E21 E25 E32 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2013-02
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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http://www3.trincoll.edu/repec/WorkingPapers2013/WP13-02.pdf First version, 2013 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tri:wpaper:1302

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