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Demand-driven inequality, endogenous saving rate and macroeconomic instability


  • Soon Ryoo


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.

Suggested Citation

  • 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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    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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