Wealth inequality and aggregate demand

Ederer, Stefan and Rehm, Miriam (2019) Wealth inequality and aggregate demand. Ecological Economic Papers, 30. WU Vienna University of Economics and Business, Vienna.

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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.

Item Type: Paper
Keywords: Wealth, Distribution, Aggregate Demand
Classification Codes: D31, D33, E12, E21, E25, E64
Divisions: Departments > Sozioƶkonomie > Ecological Economics
Depositing User: Daniel Schmelz
Date Deposited: 19 Sep 2019 06:33
Last Modified: 22 Oct 2019 00:41
URI: https://epub.wu.ac.at/id/eprint/7171

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