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Financialisation, income distribution and aggregate demand in the USA


  • Özlem Onaran
  • Engelbert Stockhammer
  • Lucas Grafl


This paper investigates the effects of financialisation and functional income distribution on aggregate demand in the USA by estimating the effects of the increase in rentier income (dividends and interest payments) and housing and financial wealth on consumption and investment. The redistribution of income in favour of profits suppresses consumption, whereas the increase in the rentier income and wealth has positive effects. A higher rentier income decreases investment. Without the wealth effects, the overall effect of the changes in distribution on aggregate demand would have been negative. Thus a pro-capital income distribution leads to a slightly negative effect on growth, i.e. the USA economy is moderately wage-led. Copyright The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Suggested Citation

  • Özlem Onaran & Engelbert Stockhammer & Lucas Grafl, 2011. "Financialisation, income distribution and aggregate demand in the USA," Cambridge Journal of Economics, Oxford University Press, vol. 35(4), pages 637-661.
  • Handle: RePEc:oup:cambje:v:35:y:2011:i:4:p:637-661

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    References listed on IDEAS

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