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Debt-driven growth? Wealth, distribution and demand in OECD countries

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  • Engelbert Stockhammer
  • Rafael Wildauer

Abstract

The paper investigates the effects of changes in the distribution of income and wealth on aggregate demand and its components. The model of Bhaduri and Marglin is extended to include personal income inequality as well as asset prices and debt. This allows for an evaluation of the wage- or profit-led nature of demand regimes, of the expenditure cascade argument and several hypotheses regarding the effects of wealth and debt. Our estimates are based on a panel of 18 OECD countries covering the period 1980–2013. For the full panel, the average demand regime is found to be wage led. We fail to find effects of personal inequality, but do find strong effects of debt and property prices, which have been the main drivers of aggregate demand in the decade prior to the 2007 crisis.

Suggested Citation

  • Engelbert Stockhammer & Rafael Wildauer, 2016. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(6), pages 1609-1634.
    • Handle: RePEc:oup:cambje:v:40:y:2016:i:6:p:1609-1634.
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    File URL: http://hdl.handle.net/10.1093/cje/bev070
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    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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