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Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model

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  • Hein, Eckhard

Abstract

In a Kaleckian distribution and growth model with workers’ debt we examine the short- and long-run effects of three stylized facts of ‘finance-dominated capitalism’: a fall in animal spirits of the firm sector with respect to real investment in capital stock, re-distribution of income at the expense of the wage share, and increasing lending of rentiers to workers for consumption purposes. In particular, we specify the conditions for long-run stability of the workers’ debt-capital ratio. We thus identify the threshold for this ratio to turn unstable causing increasing financial fragility and finally financial crisis due to systemic stock-flow or stock-stock dynamics.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34115.

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Date of creation: Oct 2011
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Handle: RePEc:pra:mprapa:34115

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Keywords: Finance-dominated capitalism; distribution; household debt; financial fragility; growth; Kaleckian model;

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Citations

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Cited by:
  1. Alper Duman, 2013. "Household Debt in Turkey: The Critical Threshold for the Next Crisis," EcoMod2013 5259, EcoMod.
  2. Carlo D'Ippoliti, 2014. "Introduction: welcoming a new editorial board," PSL Quarterly Review, Economia civile, Economia civile, vol. 67(268), pages 3-8.
  3. Thomas Goda, 2013. "Changes in income inequality from a global perspective: an overview," Working Papers, Post Keynesian Economics Study Group (PKSG) PKWP1303, Post Keynesian Economics Study Group (PKSG).
  4. Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers, Post Keynesian Economics Study Group (PKSG) PKWP1305, Post Keynesian Economics Study Group (PKSG).
  5. Jakob Kapeller & Bernhard Schütz, 2012. "Conspicuous consumption, inequality and debt: The nature of consumption-driven profit-led regimes," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2012-13, Department of Economics, Johannes Kepler University Linz, Austria.
  6. Jakob Kapeller & Bernhard Schütz, 2012. "Debt, Boom, Bust: A Theory of Minsky-Veblen Cycles," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2012-14, Department of Economics, Johannes Kepler University Linz, Austria.

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