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Household debt, knowledge capital accumulation, and macrodynamic performance

Author

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  • Laura Barbosa de Carvalho
  • Gilberto Tadeu Lima
  • Gustavo Pereira Serra

Abstract

Motivated to some extent by the empirical significance of student loans in the U.S., this paper incorporates knowledge capital formation by working households financed through debt to a demand-led dynamic model of physical and knowledge capital utilization and output growth. Average labor productivity varies positively with the average knowledge capital across the labor force. A rise in labor productivity resulting from knowledge capital accumulation is fully passed on to the real wage so that the wage share remains constant. In the unique long-run equilibrium, which is stable, an exogenous rise in the wage share raises the rates of physical capital utilization and output growth but has an ambiguous effect on the rate of employment (which also measures the rate of knowledge capital utilization). The long-run equilibrium also features the following interrelated results: the output growth rate is greater than the exogenous interest rate; the debt ratio (working households’ debt as a ratio of either the physical or the knowledge capital, or the output) is independent of the interest rate; and the allocation of a higher (lower) proportion of wage income to debt repayment (consumption) raises instead of lowers the debt ratio, which we dub the paradox of debt repayment.

Suggested Citation

  • Laura Barbosa de Carvalho & Gilberto Tadeu Lima & Gustavo Pereira Serra, 2024. "Household debt, knowledge capital accumulation, and macrodynamic performance," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 47(1), pages 84-116, January.
    • Handle: RePEc:mes:postke:v:47:y:2024:i:1:p:84-116
    DOI: 10.1080/01603477.2023.2170247
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    Cited by:

    1. Gustavo Pereira Serra, 2025. "(Trying to) catch up with the higher-skilled Joneses: student loans in a segmented educational market from a post-Keynesian perspective," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 48(2), pages 172-203, April.
    2. Gilberto Tadeu Lima & Laura Barbosa de Carvalho & Gustavo Pereira Serra, 2024. "Human Capital Accumulation and Output Growth in Demand-led Macrodynamics," Working Papers, Department of Economics 2024_23, University of São Paulo (FEA-USP), revised 28 Aug 2024.
    3. Marco Stamegna, 2024. "Wage inequality and induced innovation in a classical-Marxian growth model," Journal of Evolutionary Economics, Springer, vol. 34(1), pages 127-168, January.
    4. Hiroaki Sasaki, 2025. "The paradox of technological progress, growth, distribution, and employment in a demand-led framework," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 48(3), pages 542-574, July.

    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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