Income Distribution, Consumer Debt, and Keeping Up with the Joneses: a Kaldor-Minsky-Veblen Model
AbstractWe extend Kaldor’s theory of income distribution to include workers’ debt accumulation and their motive to emulate rentiers’ consumption. Our results show that (i) the interaction between income distribution and emulation can produce instability, (ii) instability is more likely when the workers’ emulation motive is strong and bankers’ lending decisions are highly accommodating, and (iii) a plausible assumption on the nonlinearity of emulation behavior can generate a limit cycle by way of the Poincare- Bendixson theorem. Our analysis provides an alternative perspective on the secular increase in household indebtedness for the decades and the subsequent deleveraging process in the recent crisis.
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Bibliographic InfoPaper provided by Trinity College, Department of Economics in its series Working Papers with number 1302.
Length: 34 pages
Date of creation: Feb 2013
Date of revision:
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income distribution; consumer debt; emulation; instability; limit cycle;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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