Demand and Distribution in Integrated Economies

Armon Rezai

Ecological Economics Papers from Institute of Ecological Economics

Abstract: Aggregate demand is influenced by the functional income distribution of an economy and that of its trading partners. This relationship between income distribution and output is analyzed in a short-run two-country Neo-Kaleckian model. The effects of devaluation and redistribution are discussed in detail. Trade and redistribution within one country interact and output increases or decreases with changes in either depending on the specific distributional and exchange rate movements. The Marshall-Lerner condition is shown to be equivalent to the assumption of expansionary devaluation. If devaluation increases output, national redistribution policy toward wage earners is also more likely to be expansionary.

Keywords: Open Economy; Adding-Up Constraints; International Macroeconomics; Devaluation; Growth; Distribution (search for similar items in EconPapers)
Date: 2016-01
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Related works:
Working Paper: Demand and Distribution in Integrated Economies (2016)
Journal Article: Demand and distribution in integrated economies (2015)
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