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Wealth inequality and aggregate demand

The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch - in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time. / Series: Ecological Economic Papers

Identiferoai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:7171
Date January 2019
CreatorsEderer, Stefan, Rehm, Miriam
PublisherWU Vienna University of Economics and Business
Source SetsWirtschaftsuniversität Wien
LanguageEnglish
Detected LanguageEnglish
TypePaper, NonPeerReviewed
Formatapplication/pdf
Relationhttp://epub.wu.ac.at/7171/

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