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Income Distribution, Consumer Debt, and Keeping Up with the Joneses: a Kaldor-Minsky-Veblen Model

Author

Listed:
  • Yun Kim

    (Department of Economics, Trinity College)

  • Soon Ryoo

    (Department of Accounting, Finance, and Economics, Adelphi University)

Abstract

We extend Kaldor’s theory of income distribution to include workers’ debt accumulation and their motive to emulate rentiers’ consumption. Our results show that (i) the interaction between income distribution and emulation can produce instability, (ii) instability is more likely when the workers’ emulation motive is strong and bankers’ lending decisions are highly accommodating, and (iii) a plausible assumption on the nonlinearity of emulation behavior can generate a limit cycle by way of the Poincare- Bendixson theorem. Our analysis provides an alternative perspective on the secular increase in household indebtedness for the decades and the subsequent deleveraging process in the recent crisis.

Suggested Citation

  • Yun Kim & Soon Ryoo, 2013. "Income Distribution, Consumer Debt, and Keeping Up with the Joneses: a Kaldor-Minsky-Veblen Model," Working Papers 1302, Trinity College, Department of Economics.
    • Handle: RePEc:tri:wpaper:1302
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    File URL: http://www3.trincoll.edu/repec/WorkingPapers2013/WP13-02.pdf
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    References listed on IDEAS

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    Cited by:

    1. Brochier, Lidia & Macedo e Silva, Antonio Carlos, 2017. "The Macroeconomic Implications of Consumption: State-of-Art and Prospects for the Heterodox Future Research," MPRA Paper 92672, University Library of Munich, Germany.
    2. repec:zbw:rwirep:0509 is not listed on IDEAS
    3. Mathias Klein & Christopher Krause, 2014. "Income Redistribution, Consumer Credit,and Keeping up with the Riches," Ruhr Economic Papers 0509, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Mathias Klein & Christopher Krause, 2020. "Income Redistribution, Consumer Credit, and Keeping Up with the Riches," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 1937-1971, December.

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    More about this item

    Keywords

    income distribution; consumer debt; emulation; instability; limit cycle;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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