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Debt-driven growth? Wealth, distribution and demand in OECD countries

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The paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components. We extend the Bhaduri and Marglin (1990) model to include personal income inequality as well as asset prices and debt. This allows for an evaluation of the wage or profit-led nature of demand regimes, of the expenditure cascade argument (Frank et al. 2010) and several hypotheses regarding the effects of wealth and debt. Our estimates are based on a panel of 18 OECD countries covering the period 1980-2013. For the full panel the average demand regime is found to be wage led. We fail to find effects of personal inequality, but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis.

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  • Stockhammer, Engelbert & Wildauer, Rafael, 2015. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Economics Discussion Papers 2015-2, School of Economics, Kingston University London.
  • Handle: RePEc:ris:kngedp:2015_002
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    Cited by:

    1. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2017. "Is Europe disintegrating? Macroeconomic divergence, structural polarization, trade and fragility," Economics working papers 2017-15, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Rafael Wildauer & Engelbert Stockhammer, 2015. "Schuldengetriebenes Wachstum - Nachfrageffekte von Ungleichheit, Vermögenspreisen und Haushaltsverschuldung," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 41(4), pages 497-518.
    3. Philipp Heimberger & Jakob Kapeller, 2017. "The performativity of potential output: pro-cyclicality and path dependency in coordinating European fiscal policies," Review of International Political Economy, Taylor & Francis Journals, vol. 24(5), pages 904-928, September.
    4. repec:elg:ejeepi:v:14:y:2017:i:2:p131-172 is not listed on IDEAS
    5. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    6. Engelbert Stockhammer & Cédric Durand & Ludwig List, 2015. "European growth models and working class restructuring before the crisis," Working Papers PKWP1508, Post Keynesian Economics Society (PKES).
    7. repec:psl:pslqrr:2017:23 is not listed on IDEAS
    8. Engelbert Stockhammer & Joel Rabinovich & Niall Reddy, 2018. "Distribution, wealth and demand regimes in historical perspective," FMM Working Paper 14-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Prante, Franz J., 2017. "Macroeconomic effects of personal and functional income inequality: Theory and empirical evidence for the US and Germany," IPE Working Papers 83/2017, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    10. Stockhammer, Engelbert & Durand, Cédric & List, Ludwig, 2015. "Growth models and working class restructuring before the crisis," Economics Discussion Papers 2015-4, School of Economics, Kingston University London.
    11. Ewa Karwowski & Mimoza Shabani & Engelbert Stockhammer, 2016. "Financialisation: Dimensions and determinants. A cross-country study," Working Papers PKWP1619, Post Keynesian Economics Society (PKES).
    12. Rafael Wildauer, 2016. "Determinants of US household debt: New evidence from the SCF," Working Papers PKWP1608, Post Keynesian Economics Society (PKES).
    13. Kim Sujin, 2018. "Investment Puzzle: Deeper Roots," Working Papers id:12433, eSocialSciences.
    14. repec:spr:eurase:v:7:y:2017:i:1:d:10.1007_s40822-016-0061-x is not listed on IDEAS
    15. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    16. Stockhammer, Engelbert & Rabinovich, Joel & Reddy, Niall, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.
    17. Robert A. Blecker, 2015. "Wage-led Versus Profit-led Demand Regimes: The Long and Short of It," Working Papers 2015-05, American University, Department of Economics.
    18. repec:lrk:eeaart:35_3_5 is not listed on IDEAS
    19. Alexander Guschanski & Engelbert Stockhammer, 2017. "Are current accounts driven by competitiveness or asset prices? A synthetic model and an empirical test," Working Papers PKWP1716, Post Keynesian Economics Society (PKES).
    20. repec:bpj:globdv:v:7:y:2016:i:2:p:20:n:1 is not listed on IDEAS
    21. repec:nov:artigo:v:25:y:2015:i:spe:p:749-775 is not listed on IDEAS

    More about this item

    Keywords

    post-Keynesian economics; wage-led growth; Bhaduri-Marglin model; demand regimes; wealth effect; Veblen effect; expenditure cascade; aggregate demand;

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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