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Income Distribution and Consumption Driven Growth: How Consumption Behaviors of the Top Two Income Quintiles Help to Explain the Economy

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Author Info

  • Timothy A. Wunder

Abstract

Recent institutionalist and post-Keynesian work on business cycles continues with the traditional institutionalist supposition that financial bubbles drive cycles; however there has been a growing sense in the literature that household consumption, not business investment, has become the key variable. This paper will show how this is a change from historical institutional theory and it will then discuss how this change pushes income distribution toward a more central role in explaining current cycle dynamics. Specifically, this paper argues that much of the economic growth over the last two decades can be attributed to the top two quintiles borrowing more and the current slow growth can be attributed to high quintile households increasing their consumption while middle income households are continuing to deleverage.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Economic Issues.

Volume (Year): 46 (2012)
Issue (Month): 1 (March)
Pages: 173-192

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Handle: RePEc:mes:jeciss:v:46:y:2012:i:1:p:173-192

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Web page: http://www.mesharpe.com/mall/results1.asp?acr=jei

Related research

Keywords: business cycles; economic growth; household debt; income distribution; inequality;

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Cited by:
  1. David Cayla, 2013. "European Debt Crisis: How a Public Debt Restructuring Can Solve a Private Debt Issue," Journal of Economic Issues, M.E. Sharpe, Inc., vol. 47(2), pages 427-436, June.

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