IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Income distribution and current account: A sectoral perspective

  • Jan Behringer
  • Till van Treeck

We analyse the link between income distribution and the current account through a descriptive analysis for the G7 countries and a series of panel estimations for the G7 countries and a larger sample of 20 countries for the period 1972-2007. We find that, firstly, rising personal inequality leads to a decrease of household net lending and the current account, ceteris paribus. The effect is strong for top household income shares, but much weaker for the Gini coefficient of household income. This finding is consistent with consumption externalities resulting from upward-looking status comparisons. Secondly, an increase in the corporate financial balance leads to an increase in the current account, i.e., consumers do not fully 'pierce the corporate veil'. There is also tentative evidence that the corporate net lending and the current account increase as a result of a decline in the share of wages in value added. The joint effects of changes in personal and functional income distribution contribute to a significant degree to explaining the global current account imbalances prior to the Great Recession.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.boeckler.de/pdf/imk_wp_125_2013.pdf
Download Restriction: no

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 125-2013.

as
in new window

Length: 48 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:imk:wpaper:125-2013
Contact details of provider: Postal: Hans-Böckler-Straße 39, 40476 Düsseldorf
Phone: +49 211 7778 234
Fax: +49 211 7778 4234
Web page: http://www.imk-boeckler.de
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Calista Cheung & Davide Furceri & Elena Rusticelli, 2010. "Structural and Cyclical Factors behind Current-Account Balances," OECD Economics Department Working Papers 775, OECD Publishing.
  2. Schlenker, Eva & Schmid, Kai D., 2013. "Capital income shares and income inequality in the European Union," FZID Discussion Papers 80-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  3. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
  4. Feldstein, Martin S & Fane, George, 1973. "Taxes, Corporate Dividend Policy and Personal Savings: The British Postwar Experience," The Review of Economics and Statistics, MIT Press, vol. 55(4), pages 399-411, November.
  5. Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries; An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
  6. Loukas Karabarbounis & Brent Neiman, 2013. "The Global Decline of the Labor Share," NBER Working Papers 19136, National Bureau of Economic Research, Inc.
  7. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
  8. Andrew Leigh, 2007. "How Closely Do Top Income Shares Track Other Measures of Inequality?," CEPR Discussion Papers 562, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  9. Theobald, Thomas & Belabed, Christian A., 2014. "Income Distribution and Current Account Imbalances," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100371, Verein für Socialpolitik / German Economic Association.
  10. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," NBER Working Papers 11955, National Bureau of Economic Research, Inc.
  11. Michael Sumner, 2004. "Corporate Retentions and Consumers' Expenditure," Manchester School, University of Manchester, vol. 72(1), pages 119-130, 01.
  12. Frankel, Jeffrey & Saravelos, George, 2011. "Can Leading Indicators Assess Country Vulnerability? Evidence from the 2008-09 Global Financial Crisis," Working Paper Series rwp11-024, Harvard University, John F. Kennedy School of Government.
  13. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
  14. Matteo Iacoviello, 2005. "Household Debt and Income Inequality, 1963-2003," Boston College Working Papers in Economics 629, Boston College Department of Economics, revised 18 Oct 2007.
  15. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  16. Thomas Palley, 2010. "The Relative Permanent Income Theory of Consumption: A Synthetic Keynes-Duesenberry-Friedman Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(1), pages 41-56.
  17. Yun K. Kim & Mark Setterfield & Yuan Mei, 2014. "A theory of aggregate consumption," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 11(1), pages 31-49, April.
  18. Cynamon Barry Z. & Fazzari Steven M., 2008. "Household Debt in the Consumer Age: Source of Growth--Risk of Collapse," Capitalism and Society, De Gruyter, vol. 3(2), pages 1-32, October.
  19. Charpe, Matthieu & Kühn, Stefan, 2012. "Bargaining, Aggregate Demand and Employment," MPRA Paper 40189, University Library of Munich, Germany.
  20. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 339-364, 07.
  21. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
  22. A. B. Atkinson, 2009. "Factor shares: the principal problem of political economy?," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 3-16, Spring.
  23. Heng-fu Zou, 1995. "The spirit of capitalism and savings behavior," CEMA Working Papers 79, China Economics and Management Academy, Central University of Finance and Economics.
  24. repec:chb:bcchwp:08 is not listed on IDEAS
  25. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
  26. Romain Ranciere & Nathaniel A. Throckmorton & Michael Kumhof & Claire Lebarz & Alexander W. Richter, 2012. "Income Inequality and Current Account Imbalances," IMF Working Papers 12/8, International Monetary Fund.
  27. Andrew Leigh & Alberto Posso, 2009. "Top Incomes And National Savings," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(1), pages 57-74, 03.
  28. N. Gregory Mankiw, 1999. "The Savers-Spenders Theory of Fiscal Policy," Harvard Institute of Economic Research Working Papers 1888, Harvard - Institute of Economic Research.
  29. repec:cup:cbooks:9781107612464 is not listed on IDEAS
  30. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," NBER Working Papers 15483, National Bureau of Economic Research, Inc.
  31. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
  32. Heather Boushey & Christian E. Weller, 2006. "Inequality and Household Economic Hardship in the United States of America," Working Papers 18, United Nations, Department of Economics and Social Affairs.
  33. van Treeck, Till & Sturn, Simon, 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 470934, International Labour Organization.
  34. Orazio Attanasio & Erich Battistin & Hidehiko Ichimura, 2007. "What Really Happened to Consumption Inequality in the United States?," NBER Chapters, in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 515-543 National Bureau of Economic Research, Inc.
  35. Jochen Hartwig, 2013. "Distribution and growth in demand and productivity in Switzerland (1950--2010)," Applied Economics Letters, Taylor & Francis Journals, vol. 20(10), pages 938-944, July.
  36. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
  37. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
  38. Eckhard Hein & Lena Vogel, 2008. "Distribution and growth reconsidered: empirical results for six OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 32(3), pages 479-511, May.
  39. Gennaro Zezza, 2008. "U.S. growth, the housing market, and the distribution of income," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(3), pages 375-401, April.
  40. Feldstein, Martin S., 1973. "Tax incentives, corporate saving, and capital accumulation in the United States," Journal of Public Economics, Elsevier, vol. 2(2), pages 159-171, April.
  41. Schmidt-Hebbel, Klaus & Serven, Luis, 2000. "Does income inequality raise aggregate saving?," Journal of Development Economics, Elsevier, vol. 61(2), pages 417-446, April.
  42. Markus Christen & Ruskin Morgan, 2005. "Keeping Up With the Joneses: Analyzing the Effect of Income Inequality on Consumer Borrowing," Quantitative Marketing and Economics, Springer, vol. 3(2), pages 145-173, June.
  43. Menzie D. Chinn & Barry Eichengreen & Hiro Ito, 2011. "A Forensic Analysis of Global Imbalances," NBER Working Papers 17513, National Bureau of Economic Research, Inc.
  44. Francisco Rodriguez & Arjun Jayadev, 2010. "The Declining Labor Share of Income," Human Development Research Papers (2009 to present) HDRP-2010-36, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
  45. �zlem 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.
  46. Yannis A. Monogios & Christos Pitelis, 2004. "On (Ultra) rationality and the corporate and government veils," Manchester School, University of Manchester, vol. 72(3), pages 382-402, 06.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:imk:wpaper:125-2013. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Nemitz)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.