Financialization, income distribution, and aggregate demand in the USA.

Onaran, Ozlem and Stockhammer, Engelbert and Grafl, Lukas (2011) Financialization, income distribution, and aggregate demand in the USA. Cambridge Journal of Economics, 35 (4). pp. 637-651. ISSN 0309-166X

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Abstract

This paper investigates the effects of financialization and functional income distribution on aggregate demand in the USA by estimating the effects of the increase in rentier income (dividends and interest payments) and housing and financial wealth on consumption and investment. The redistribution of income in favor of profits suppresses consumption, whereas the increase in the rentier income and wealth has positive effects. A higher rentier income decreases investment. Without the wealth effects, the overall effect of the changes in distribution on aggregate demand would have been negative. Thus a pro-capital income distribution leads to a slightly negative effect on growth, i.e. the USA economy is moderately wage-led.

Item Type: Article
Additional Information: Originally published as discussion paper no 136 (March 2010) by Middlesex University Business School, Department of Economics and Statistics.
Research Areas: A. > Business School > Economics
Item ID: 5035
Notes on copyright: Pre-refereed version as permitted by publisher.
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Depositing User: Dr Ozlem Onaran
Date Deposited: 20 Apr 2010 13:27
Last Modified: 16 Dec 2015 13:23
URI: http://eprints.mdx.ac.uk/id/eprint/5035

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