Income Distribution and Current Account: A Sectoral Perspective

Till van Treeck and Jan Behringer

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: We analyse the link between income distribution and the current account for the period 1972-2007. We find that rising (top-end) personal inequality leads to a decrease of the current account, ceteris paribus. This result is consistent with consumption externalities resulting from upward-looking comparisons. Moreover, an increase in the corporate financial balance or a decrease in the labour income share leads to an increase in the current account. This finding is consistent with the view that consumers do not fully pierce the corporate veil . Changes in personal and functional income distribution have contributed considerably to the widening of current account balances.

JEL-codes: D31 D33 F41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Income distribution and the current account: a sectoral perspective (2015)
Working Paper: Income distribution and current account: A sectoral perspective (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100296

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