Does income distribution matter for effective demand? Evidence from the United States
AbstractThis article examines the influence of income distribution in the determination of effective demand in the US. A simple model is developed to simulate the effects of changing income inequality on the aggregate propensity to consume. The simulation results illustrate that income inequality has a substantial negative impact on consumption when household spending is assumed to be income-constrained. Econometric evidence is presented that rising private sector wage inequality had a dampening effect on the time path of consumption in the United States between 1978 and 2000. The methodology entails time series estimation of consumption specifications with a measure of income inequality (the Theil index) included among the explanatory variables. The argument is made that, ceteris paribus, rising income inequality creates a need for greater reliance on debt to sustain a given level of household spending.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Review of Political Economy.
Volume (Year): 16 (2004)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.tandfonline.com/CRPE20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean-Marc Burniaux & Thai-Thanh Dang & Douglas Fore & Michael F. Förster & Marco Mira d'Ercole & Howard Oxley, 1998. "Income Distribution and Poverty in Selected OECD Countries," OECD Economics Department Working Papers 189, OECD Publishing.
- Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
- Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
- Steven Pressman, 2013. "Justice and History: the big problem of Wilt Chamberlain," Economic Issues Journal Articles, Economic Issues, vol. 18(1), pages 1-16, March.
- Steven Fazzari & Barry Z. Cynamon, 2013.
"Inequality and Household Finance during the Consumer Age,"
INET Research Notes
23, Institute for New Economic Thinking (INET).
- Barry Z. Cynamon & Steven M. Fazzari, 2013. "Inequality and Household Finance during the Consumer Age," Economics Working Paper Archive wp_752, Levy Economics Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.