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Rising Income Inequality, Increased Household Indebtedness, and Post Keynesian Macrodynamics

Author

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  • Mark Setterfield

    () (Department of Economics, New School for Social Research)

Abstract

A Kaleckian growth model is modified to incorporate working households who borrow to finance some part of their consumption spending. The impact of this behavior on the sustainability of the growth process is then studied by means of a numerical analysis that captures various dimensions of increased income inequality in the US. The results show that the precise manner in which debtor households service their debts has important effects on the economy’s macrodynamics.

Suggested Citation

  • Mark Setterfield, 2014. "Rising Income Inequality, Increased Household Indebtedness, and Post Keynesian Macrodynamics," Working Papers 1403, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1403
    as

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    File URL: http://www.economicpolicyresearch.org/econ/2014/NSSR_WP_032014.pdf
    File Function: First version, 2014
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    References listed on IDEAS

    as
    1. Mark Setterfield & Yun K. Kim & Jeremy Rees, 2016. "Inequality, Debt Servicing and the Sustainability of Steady State Growth," Review of Political Economy, Taylor & Francis Journals, vol. 28(1), pages 45-63, January.
    2. Thomas I. Palley, 2015. "The middle class in macroeconomics and growth theory: a three-class neo-Kaleckian–Goodwin model," Cambridge Journal of Economics, Oxford University Press, vol. 39(1), pages 221-243.
    3. Peter Skott & Soon Ryoo, 2008. "Macroeconomic implications of financialisation," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 827-862, November.
    4. Thomas I. Palley, 2002. "Economic contradictions coming home to roost? Does the U.S. economy face a long-term aggregate demand generation problem?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(1), pages 9-32.
    5. Jon D. Wisman, 2013. "Wage stagnation, rising inequality and the financial crisis of 2008," Cambridge Journal of Economics, Oxford University Press, vol. 37(4), pages 921-945.
    6. Simon Mohun, 2006. "Distributive shares in the US economy, 1964--2001," Cambridge Journal of Economics, Oxford University Press, vol. 30(3), pages 347-370, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Consumer debt; emulation; income distribution; Golden Age growth regime; Neoliberal growth regime;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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