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Emulation, indebtedness and income distribution: A monetary theory of production approach

  • Guglielmo Forges Davanzati


    (University of Salento)

  • Andrea Pacella

    (University of Salento)

The aim of this paper is to study the effect of emulation within a basic schema of the monetary theory of production (MTP). A theoretical model is presented, where workers set their target level of consumption based on the comparison with other workers taken as reference. It is shown that emulation can play a crucial role in increasing workers’ propensity to indebtedness. As a result, profits increase and so does the price level, thus generating a decline of the real wage. Moreover, the existence of indebtedness can provide a further solution to the socalled »paradox of profits« within the MTP.

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Article provided by Edward Elgar in its journal Intervention.

Volume (Year): 7 (2010)
Issue (Month): 1 ()
Pages: 147-165

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Handle: RePEc:elg:ejeepi:v:7:y:2010:i:1:p:147-165
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