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Conspicuous consumption, inequality and debt: The nature of consumption-driven profit-led regimes

  • Jakob Kapeller


    (University of Linz, Linz, Austria)

  • Bernhard Schütz


    (Department of Economics, University of Linz, Linz, Austria)

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    This paper extends the theoretical concept of wage-led and profit-led demand regimes, first introduced by Amit Bhaduri and Steven Marglin in the early 1990s, by incorporating relative consumption concerns. Specifically, it integrates the Veblenian concept of conspicuous consumption into a typical Bhaduri-Marglin model by assuming that relative consumption concerns matter primarily within the working class. If in such a framework the profit share increases and the corresponding decrease in workers' income is distributed unevenly, efforts to "keep up with the Joneses" may increase consumption and, hence, lead to a consumption- driven profit-led regime. The model's empirical relevance is illustrated with respect to the pre-crisis developments as observed in the U.S.

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    Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2012-13.

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    Length: 24 pages
    Date of creation: Dec 2012
    Date of revision:
    Handle: RePEc:jku:econwp:2012_13
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