IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Debt Servicing, Aggregate Consumption, and Growth

  • Mark Setterfield

    ()

    (Department of Economics, Trinity College)

  • Yun Kim

    ()

    (Department of Economics, Trinity College)

We develop a neo-Kaleckian growth model that emphasizes the importance of consumption behavior. In our model, workers first make consumption decisions based on their gross income, and then treat debt servicing commitments as a substitute for saving. Workers' borrowing is induced by their desire to keep up with the consumption standard set by rentiers' consumption, reflecting an aspect of the relative income hypothesis. As a result of this consumption and debt servicing behavior, consumer debt accumulation and income distribution have effects on aggregate demand, profitability, and economic growth that differ from those found in existing models. We also investigate the financial sustainability of the Golden Age and Neoliberal growth regimes within our framework. It is shown that distributional changes between the Golden Age and the Neoliberal regimes, together with corresponding changes in consumption emulation behavior via expenditure cascades, suffice to make the Neoliberal growth regime unsustainable.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://internet2.trincoll.edu/repec/WorkingPapers2013/WP13-16.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Trinity College, Department of Economics in its series Working Papers with number 1316.

as
in new window

Length: 33 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:tri:wpaper:1316
Contact details of provider: Postal: 300 Summit Street, Hartford, CT 06106-3100
Phone: (860) 297 - 2485
Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yun K. Kim & Mark Setterfield & Yuan Mei, 2014. "A theory of aggregate consumption," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 11(1), pages 31-49, April.
  2. David Bunting, 1998. "Distributional Basis of Aggregate Consumption," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 20(3), pages 389-413, April.
  3. 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, M.E. Sharpe, Inc., vol. 25(1), pages 9-32, January.
  4. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February.
  5. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 339-364, 07.
  6. Thomas I. Palley, 2013. "A K aldor– Hicks– Goodwin– Tobin– Kalecki model of growth and distribution," Metroeconomica, Wiley Blackwell, vol. 64(2), pages 319-345, 05.
  7. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
  8. Jon D. Wisman, 2008. "Household Saving, Class Identitiy, and Conspicuous Consumption," Working Papers 2008-19, American University, Department of Economics.
  9. Annamaria Lusardi & Daniel Schneider & Peter Tufano, 2011. "Financially Fragile Households: Evidence and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 83-150.
  10. Cynamon Barry Z. & Fazzari Steven M., 2008. "Household Debt in the Consumer Age: Source of Growth--Risk of Collapse," Capitalism and Society, De Gruyter, vol. 3(2), pages 1-32, October.
  11. Aldo Barba & Massimo Pivetti, 2009. "Rising household debt: Its causes and macroeconomic implications--a long-period analysis," Cambridge Journal of Economics, Oxford University Press, vol. 33(1), pages 113-137, January.
  12. Mark Setterfield & Andrew Budd, 2010. "A Keynes-Kalecki Model of Cyclical Growth with Agent-Based Features," Working Papers 1008, Trinity College, Department of Economics.
  13. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
  14. Peter Skott & Soon Ryoo, 2007. "Macroeconomic implications of financialization," UMASS Amherst Economics Working Papers 2007-08, University of Massachusetts Amherst, Department of Economics.
  15. Harris, Donald J, 1974. "The Price Policy of Firms, the Level of Employment and Distribution of Income in the Short Run," Australian Economic Papers, Wiley Blackwell, vol. 13(22), pages 144-51, June.
  16. �zlem Onaran & Engelbert Stockhammer & Lucas Grafl, 2011. "Financialisation, income distribution and aggregate demand in the USA," Cambridge Journal of Economics, Oxford University Press, vol. 35(4), pages 637-661.
  17. Thomas I. Palley, 2014. "The middle class in macroeconomics and growth theory: A three class neo-Kaleckian ? Goodwin model," IMK Working Paper 130-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  18. Marianne Bertrand & Adair Morse, 2013. "Trickle-Down Consumption," NBER Working Papers 18883, National Bureau of Economic Research, Inc.
  19. Thomas I. Palley, 2012. "Wealth and wealth distribution in the neo-Kaleckian growth model," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 34(3), pages 453-474, April.
  20. Jon D. Wisman, 2012. "Wage Stagnation, Rising Inequality and the Financial Crisis of 2008," Working Papers 2012-01, American University, Department of Economics.
  21. A. Asimakopulos, 1975. "A Kaleckian Theory of Income Distribution," Canadian Journal of Economics, Canadian Economics Association, vol. 8(3), pages 313-33, August.
  22. Jakob Kapeller & Bernhard Schütz, 2012. "Conspicuous consumption, inequality and debt: The nature of consumption-driven profit-led regimes," Economics working papers 2012-13, Department of Economics, Johannes Kepler University Linz, Austria.
  23. 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)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tri:wpaper:1316. 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)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.