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Demand-driven inequality, endogenous saving rate and macroeconomic instability

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  • Soon Ryoo

Abstract

This article examines consumption dynamics in a Cambridge model of growth and distribution. The model endogenises the workers’ saving rate and incorporates out-of-equilibrium dynamics explicitly. The analysis identifies a new mechanism of macroeconomic instability that emerges from the interaction between the Kaldorian process of demand-driven inequality and the workers’ saving behaviour. The mechanism can generate perpetual cycles where the upwards phase is characterised by a prolonged period of falling saving rate and increasing income inequality. The article discusses the empirical relevance of the formal analysis. The article discusses the empirical relevance of the analytic results.

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  • Soon Ryoo, 2016. "Demand-driven inequality, endogenous saving rate and macroeconomic instability," Cambridge Journal of Economics, Oxford University Press, vol. 40(1), pages 201-225.
  • Handle: RePEc:oup:cambje:v:40:y:2016:i:1:p:201-225.
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    File URL: http://hdl.handle.net/10.1093/cje/beu062
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    Cited by:

    1. Soon Ryoo, 2016. "Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective," Metroeconomica, Wiley Blackwell, vol. 67(2), pages 429-457, May.
    2. Roberto Veneziani & Luca Zamparelli & Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.

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