IDEAS home Printed from https://ideas.repec.org/p/new/wpaper/1601.html
   My bibliography  Save this paper

Household Borrowing and the Possibility of “Consumption-Driven, Profit-Led Growth"

Author

Listed:
  • Mark Setterfield

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

  • Yun K. Kim

    () (Department of Economics, University of Massachusetts, Boston)

Abstract

We first show that, with a Kaleckian structure that is consistent with Pasinetti (1962), the relationship between distribution and growth is more robust than conventional wisdom suggests. Next, we extend our model by incorporating borrowing and emulation effects into workers' consumption behavior, under different assumptions about how debt is serviced. Our results demonstrate that borrowing and emulation transform the relationship between distribution and growth, giving rise to the possibility of a "consumption-driven, profit-led" growth regime (Kapeller and Schutz, 2015) and what we call the "paradox of inequality." A key conclusion is that the wage-or -profit led characteristics of the growth process, rather than being invariant, can be altered by social constructs such as borrowing and consumption norms that change over time.

Suggested Citation

  • Mark Setterfield & Yun K. Kim, 2016. "Household Borrowing and the Possibility of “Consumption-Driven, Profit-Led Growth"," Working Papers 1601, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1601
    as

    Download full text from publisher

    File URL: http://www.economicpolicyresearch.org/econ/2016/NSSR_WP_012016.pdf
    File Function: First version, 2016
    Download Restriction: no

    More about this item

    Keywords

    Borrowing; saving; emulation; debt servicing; wage-led growth; profit-led growth;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:new:wpaper:1601. 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: (Mark Setterfield). General contact details of provider: http://edirc.repec.org/data/denewus.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.