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Financialization and its Long-run Macroeconomic Effects in a Kalecki-Minsky Model

  • Shinya Fujita
  • Hiroaki Sasaki

One of the main characteristics of “financialization” is the redistribution of income in favor of shareholders, at the expense of workers. In this paper, we interpret pro-shareholder redistribution as a decrease in both retention ratio and wage share. Using both the Kaleckian macroeconomic model and the Minskyan taxonomy of finance regime, we investigate the long-run effects of such parametric changes on the rate of capital accumulation and the debt-capital ratio, on the one hand, and on the financial structures of firms, on the other. A decrease in the retention ratio leads to higher capital accumulation, but makes financial structures fragile. Moreover, a rise in profit share improves the financial position in the long run if the short-run equilibrium is profit-led growth regime; this is not necessarily so with wage-led growth.

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Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-11-001.

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Length: 28 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:kue:dpaper:e-11-001
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  1. Eckhard Hein, 2008. "Shareholder value orientation, distribution and growth – short- and medium-run effects in a Kaleckian model," Department of Economics Working Papers wuwp120, Vienna University of Economics and Business, Department of Economics.
  2. Hein, Eckhard & Schoder, Christian, 2009. "Interest rates, distribution and capital accumulation: A Post-Kaleckian perspective on the US and Germany," IPE Working Papers 04/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  3. Sébastien Charles, 2008. "Teaching Minsky's financial instability hypothesis: a manageable suggestion," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 31(1), pages 125-138, September.
  4. Eckhard Hein, 2004. "Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model," Macroeconomics 0412005, EconWPA.
  5. Eckhard Hein, 2005. "Interest, debt and capital accumulation - a Kaleckian approach," Macroeconomics 0510007, EconWPA.
  6. Antonio J. A. Meirelles & Gilberto Tadeu Lima, 2004. "Debt, Financial Fragility And Economic Growth: A Post-Keynesian Macromodel," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 094, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  7. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2004. "A Macrodynamics Of Debt Regimes, Financial Instability And Growth," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 074, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  8. Sebastien Charles, 2008. "A Post-Keynesian Model of Accumulation with a Minskyan Financial Structure," Review of Political Economy, Taylor & Francis Journals, vol. 20(3), pages 319-331.
  9. Sébastien Charles, 2008. "Corporate debt, variable retention rate and the appearance of financial fragility," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 781-795, September.
  10. Eckhard Hein & Till Van Treeck, 2010. "Financialisation and Rising Shareholder Power in Kaleckian/Post-Kaleckian Models of Distribution and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 22(2), pages 205-233.
  11. Peter Skott & Soon Ryoo, 2008. "Macroeconomic implications of financialisation," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 827-862, November.
  12. Kazuhiro Kurose, 2004. "Rate of profit and interest in a growth theory with endogenous money," Cambridge Journal of Economics, Oxford University Press, vol. 28(6), pages 889-901, November.
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