Wealth inequality and aggregate demand

Stefan Ederer and Miriam Rehm

No 4, ifso working paper series from University of Duisburg-Essen, Institute for Socioeconomics (ifso)

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)
Date: 2019
New Economics Papers: this item is included in nep-gro, nep-hme, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econstor.eu/bitstream/10419/215636/1/ifsowp-4.pdf (application/pdf)

Related works:
Journal Article: Wealth inequality and aggregate demand (2021)
Working Paper: Wealth inequality and aggregate demand (2019)
Working Paper: Wealth inequality and aggregate demand (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifsowp:4

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