Household demand, income distribution and the sustainability of profit-led growth: A complementarity between Institutionalist and Keynesian views
Sprache des Vortragstitels:
Keynes-Kalecki / Transition / Crisis - Workshop in Honour of Kazimierz Laski on the occasion of his 90th birthday
Sprache des Tagungstitel:
This paper illustrates the compatibility of Institutionalist and (Post-)Keynesian arguments by discussing an important but mostly overlooked complementarity between these two traditions. More specifically, we integrate the Veblenian idea of 'conspicuous consumption' in a standard (Post-)Keynesian model - the Bhaduri-Marglin model. Thereby we show that the arguments associated with these concepts are not merely compatible, but really complementary, hence leading to novel theoretical insights. The specific model presented here provides a rationale for a consumption-driven profit-led demand regime, which depends on excess indebtedness of households induced by a growth in income inequality between workers and capitalists as well as among workers. By linking debt and demand in a rather straightforward manner the model improves our understanding of current economic developments, especially the pre-crisis period in the U.S. According to our model the sustainability of such a regime depends on the intensity of income redistribution from workers to capitalists and on the willingness of creditors to grant loans.