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U.S. growth, the housing market, and the distribution of income

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  • Gennaro Zezza

Abstract

Keynesian models of household behavior suggest that a shift in the distribution of income toward profits—or toward rentiers—should imply an increase in the propensity to save out of income for the population as a whole. However, the available empirical evidence for the United States shows that, starting in 1985, the propensity to save out of income for the household sector has decreased steadily. Starting in 1981, the share of income accruing to the richest 5 percent of the population increased steadily, with wide fluctuations related to capital gains on equities and, more recently, in the housing market. The aim of this paper is to lay down a growth model, grounded in the Post Keynesian stock-flow-consistent approach of Godley and Lavoie, to analyze the links between consumption and saving behavior of two classes of households—financial markets and the housing market. The model will be used from a theoretical perspective to analyze the dynamics of markets along a steady growth path.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 30 (2008)
Issue (Month): 3 (April)
Pages: 375-401

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Handle: RePEc:mes:postke:v:30:y:2008:i:3:p:375-401

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

Related research

Keywords: capital gains; growth; housing market; income distribution; saving propensity;

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Cited by:
  1. Eckhard Hein & Nina Dodig, 2014. "Financialisation, distribution, growth and crises – long-run tendencies," Working papers wpaper23, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  2. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2013. "Innovation and Finance: A Stock Flow Consistent Analysis of Great Surges of Development," INET Research Notes 34, Institute for New Economic Thinking (INET).
  3. Eugenio Caverzasi, 2012. "From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis," DEM Working Papers Series 018, University of Pavia, Department of Economics and Management.
  4. Charpe, Matthieu & Flaschel, Peter, 2013. "Workers’ debt, default and the diversity of financial fragilities," Structural Change and Economic Dynamics, Elsevier, vol. 27(C), pages 48-65.
  5. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  6. Jakob Kapeller & Bernhard Schütz, 2012. "Conspicuous consumption, inequality and debt: The nature of consumption-driven profit-led regimes," Economics working papers 2012-13, Department of Economics, Johannes Kepler University Linz, Austria.
  7. Gechert, Sebastian, 2012. "The multiplier principle, credit-money and time," MPRA Paper 34648, University Library of Munich, Germany.
  8. Christian Belabed & Thomas Theobald & Till van Treeck, 2013. "Income Distribution and Current Account Imbalances," INET Research Notes 36, Institute for New Economic Thinking (INET).
  9. Jan Behringer & Till van Treeck, 2013. "Income distribution and current account: A sectoral perspective," IMK Working Paper 125-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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