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Demand and distribution in integrated economies

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  • Armon Rezai

Abstract

Aggregate demand is influenced by the functional distribution of income of an economy and that of its trading partner. The relationship between income distribution and output is analysed in a short-run, two-country neo-Kaleckian model. The effects of devaluation and redistribution are discussed in detail. Trade and redistribution within one country interact and output increases or decreases with changes in either depending on the specific distributional and exchange rate movements. The Marshall–Lerner condition is shown to be equivalent to the assumption of expansionary devaluation. If devaluation increases output, national redistribution policy towards wage earners is also more likely to be expansionary.

Suggested Citation

  • Armon Rezai, 2015. "Demand and distribution in integrated economies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1399-1414.
    • Handle: RePEc:oup:cambje:v:39:y:2015:i:5:p:1399-1414.
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    File URL: http://hdl.handle.net/10.1093/cje/beu060
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    Cited by:

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    2. Engelbert Stockhammer, 2015. "Wage-led versus profit-led demand: What have we learned? A Kalecki-Minsky view," Working Papers PKWP1512, Post Keynesian Economics Society (PKES).
    3. Cem Oyvat & Oğuz Öztunalı & Ceyhun Elgin, 2020. "Wage‐led versus profit‐led demand: A comprehensive empirical analysis," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 458-486, July.
    4. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    5. Köhler, Karsten, 2016. "Currency devaluations, aggregate demand, and debt dynamics in an economy with foreign currency liabilities," IPE Working Papers 78/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Enno Schröder, 2020. "Offshoring, employment, and aggregate demand," Journal of Evolutionary Economics, Springer, vol. 30(1), pages 179-204, January.
    7. Hiroaki Sasaki, 2021. "Thirlwall’s law, uneven development, and income distribution," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 592-611, July.

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