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Distributive Cycles and Earnings Inequality: A Kaleckian Goodwinian‐Inspired Model

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  • Marina da Silva Sanches

Abstract

Rising wage inequality since the 1980s is well‐documented, but cyclical dynamics are less explored. This study builds a Kaleckian model analyzing the link between aggregate demand (mediated by employment) and earnings inequality. The model features three classes: capitalists, production, and professional workers. The effect of inequality on demand depends on whether the economy is inequality‐led. Findings show that policies raising lower‐tier workers' income share reduce inequality and boost demand. Fiscal stimulus has ambiguous effects but tends to lower inequality in high‐inequality economies. Employment policies favoring production workers can reduce inequality and increase demand, while their bargaining power strengthens aggregate demand.

Suggested Citation

  • Marina da Silva Sanches, 2026. "Distributive Cycles and Earnings Inequality: A Kaleckian Goodwinian‐Inspired Model," Metroeconomica, Wiley Blackwell, vol. 77(1), pages 17-35, February.
    • Handle: RePEc:bla:metroe:v:77:y:2026:i:1:p:17-35
    DOI: 10.1111/meca.12507
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