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Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run 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 model US household debt accumulation during the neoliberal boom as a response to emulation e ects and the decline of the social wage, which has "privatized" an increasing share of the costs of providing for services such as health and education. The debt dynamics of the US economy are then studied under alternative assumptions about the con guration of distributional variables, which is shown to differ across varieties of capitalism that have "neoliberalized" to di erent degrees. A key result is that distributional change alone will not make US neoliberal capitalism financially sustainable due, in part, to the paradoxical nature of inequality as a spur to household borrowing, and hence a source of both demand-formation and financial fragility. Achieving sustainability requires, instead, more wide-ranging reform.

Suggested Citation

  • Mark Setterfield & Yun K. Kim, 2018. "Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run Growth," Working Papers 1806, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1806
    as

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    File URL: http://www.economicpolicyresearch.org/econ/2018/NSSR_WP_062018.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Varieties of capitalism; neoliberalism; inequality; growth; financial fragility; financial sustainability;

    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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