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Inequality and Growth in Neo-Kaleckian and Cambridge Growth Theory

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  • Thomas I. Palley

Abstract

This paper examines the relationship between inequality and growth in the neo-Kaleckian and Cambridge growth models. The paper explores the channels whereby functional and personal income distribution impact growth. The growth - inequality relationship can be negative or positive, depending on the economy's characteristics. Contrary to widespread claims, inequality per se does not impact growth through macroeconomic channels. Instead, both growth and inequality are impacted by changes in the underlying forms and pattern of income payments. However, inequality is critical at the microeconomic level as it explains differences in household propensities to consume which are at the foundation of neo-Kaleckian and Cambridge growth theory.

Suggested Citation

  • Thomas I. Palley, 2016. "Inequality and Growth in Neo-Kaleckian and Cambridge Growth Theory," IMK Working Paper 167-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:167-2016
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    References listed on IDEAS

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    1. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864.
    2. Laura Carvalho & Armon Rezai, 2016. "Personal income inequality and aggregate demand," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 491-505.
    3. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 267-279.
    4. Christian A Belabed & Thomas Theobald & Till van Treeck, 2018. "Income distribution and current account imbalances [Notes on capacity utilisation, distribution and accumulation]," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 42(1), pages 47-94.
    5. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    6. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 8(1), pages 25-40, March.
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    Cited by:

    1. Özlem Onaran & Cem Oyvat & Eurydice Fotopoulou, 2019. "The effects of gender inequality, wages, wealth concentration and fiscal policy on macroeconomic performance," FMM Working Paper 50-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Roth, Steve, 2021. "Why the Flow of Funds Don’t Explain the Flow of Funds: Sectoral Balances, Balance Sheets, and the Accumulation Fallacy," MPRA Paper 109976, University Library of Munich, Germany.
    3. Zhang Qiwang & Wang Xiaorui, 2020. "Factors Influencing Employment Rate and Mobility of Science and Engineering and Economics and Management Graduates in Northeast China: An Examination," SAGE Open, , vol. 10(2), pages 21582440209, June.

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    More about this item

    Keywords

    Income Inequality; growth; neo-Kaleckian theory; Cambridge growth theory;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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