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

Engelbert Stockhammer; Rafael Wildauer

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

Engelbert Stockhammer, Rafael Wildauer

Research output: Working paper › Discussion paper

Abstract

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.

Original language	English
Place of Publication	Kingston upon Thames, U.K.
Publisher	Faculty of Arts and Social Sciences, Kingston University
Number of pages	35
Publication status	Published - 16 Feb 2015

Publication series

Name	Economics Discussion Paper
Publisher	Faculty of Arts and Social Sciences, Kingston University
No.	2015-02

Keywords

Bhaduri-Marglin model
Economics and econometrics
Veb
demand regimes
post-Keynesian economics
wage-led growth
wealth effect

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Stockhammer-E-30450Final published version, 1.04 MBLicence: Unspecified

http://ideas.repec.org/p/ris/kngedp/2015_002.html

Cite this

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abstract = "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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AU - Wildauer, Rafael

PY - 2015/2/16

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N2 - 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.

AB - 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.

KW - Bhaduri-Marglin model

KW - Economics and econometrics

KW - Veb

KW - demand regimes

KW - post-Keynesian economics

KW - wage-led growth

KW - wealth effect

M3 - Discussion paper

T3 - Economics Discussion Paper

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

PB - Faculty of Arts and Social Sciences, Kingston University

CY - Kingston upon Thames, U.K.

ER -

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

Abstract

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Keywords

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