This paper presents a theoretical and empirical investigation of how changes in the size distribution of income can affect aggregate demand and the demand regime of an economy. After presenting empirical evidence for the US economy that the propensity to save increases significantly from the bottom to the top quintile of wage earners, we demonstrate that more equal distributions always lead to higher output in the traditional neo-Kaleckian macroeconomic model. We also present conditions under which a reduction of income inequality among workers turns demand more wage-led. This view is supported by the results of an econometric study for the United States (1967-2010) which show that the rise after 1980 in income inequality has made the US economy more profit-led.

No abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe paper discusses the trajectories of the Greek public deficit and sovereign debt between 1980 and 2010 and its connection to the political and economic environment of the same period. We pay special attention to the causality between the public and the external deficit in the period after 1995, the post-Maastricht treaty period. We argue that, due to the European monetary unification process and the adoption of the common currency, causality ran from the external deficit to the public deficit. This hypothesis is tested econometrically using both Granger Causality and Cointegration analyses. We find empirical support for this hypothesis. and 2010 and its connection to the political and economic environment of the same period. We pay special attention to the causality between the public and the external deficit in the period after 1995, the post-Maastricht treaty period. We argue that, due to the European monetary unification process and the adoption of the common currency, causality ran from the external deficit to the public deficit. This hypothesis is tested econometrically using both Granger Causality and Cointegration analyses. We find empirical support for this hypothesis.

diversification or specialization: an analysis of the process of structural change of the Brazilian industry. Based on findings by Imbs and Wacziarg (2003), whose empirical study has established the existence of a u-shaped pattern in the evolution of industrial specialization relative to per capita income, this paper aimed at determining the path of structural change followed by the Brazilian industry in the last decades and at comparing it with the evidence for other countries. The conclusion is that the stage of diversification of the Brazilian industrial structure has ended at a relatively low level of per capita income.

We investigate the interaction between demand-driven growth and income distribution in open economies, by combining expenditure-switching and demand spillover effects in a neo-Kaleckian two country model. First, we specify elasticities of wage share and real exchange rate to the money wage relative to labor productivity, in order to precisely describe the distributive pass-through from money wages to the labor share and the real exchange rate. Second, we analyze the demand effects of an increase in the money wage for given labor productivity (a redistribution towards labor) in both Home and Foreign country, as well as globally. We derive closed form results for two identical countries. These results indicate that redistribution towards labor at Home: (i) always increases growth globally if Home is wage-led, but can lead to lower growth at Home relative to Foreign; and (ii) will always imply lower growth at Home relative to Foreign if Home is profit-led, but can still be growth-enhancing at Home. Thus, to the extent that countries are concerned with their relative economic performance, a fallacy of composition can emerge. Numerical simulations suggest that these fallacies could indeed occur. As a consequence, 'returns to coordination' over international labor policies might be substantial.