Income distribution and the multiplier : an exploration of nonlinear distribution effects in linear Kaleckian distribution and growth models

In this paper, I show that the income-autonomous demand multiplier of Keynesian-Kaleckian models is endogenous to changes in income distribution. This effect gives rise to non-linearity of distributional effects, even in basic models. Under certain conditions, an important consequence from the distr...

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Bibliographic Details
Main Author: Prante, Franz J. (Author)
Format: eBook
Language:English
Published: Berlin : Berlin School of Economics and Law, Institute for International Political Economy Berlin September 2019
Series:Institute for International Political Economy. Working papers no. 121 (2019)
Physical Description:1 Online-Ressource (circa 46 Seiten) Illustrationen
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  • In this paper, I show that the income-autonomous demand multiplier of Keynesian-Kaleckian models is endogenous to changes in income distribution. This effect gives rise to non-linearity of distributional effects, even in basic models. Under certain conditions, an important consequence from the distribution-sensitive multiplier is that a higher wage share can have increasingly expansionary effects, which might even shift a profit-led investment regime to a wage-led one in the basic post-Kaleckian model. Surprisingly, the respective literature on distribution and growth largely ignored these features of Keynesian-Kaleckian macroeconomic models. After a theoretical discussion on the implications of the distribution-sensitive multiplier in basic closed- and openeconomy models, I present a counterfactual illustration based on empirical parameter estimations from the literature and the development of functional income distribution for selected EU countries. My analysis indicates that a rising profit share has put partial downward pressure on the wage-ledness of aggregate demand in many EU countries. These results stress the relevance of this particular form of path dependency for empirical research and policy debates on distribution and growth.