Articlegreen2012

Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model

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Economic Theory and Policy Political Economy and Marxism Economic theories and models

Abstract

In a Kaleckian distribution and growth model with workers’ debt we examine the short and long run effects of three stylized facts of “finance-dominated capitalism”: a fall in animal spirits of the firm sector with respect to real investment in capital stock, re-distribution of income at the expense of the wage share, and increasing lending of rentiers to workers for consumption purposes. In particular, we specify the conditions for long-run stability of the workers’ debt-capital ratio. We thus identify the threshold for this ratio to turn unstable causing increasing financial fragility and finally financial crisis due to systemic stock-flow or stock-stock dynamics. JEL Codes: E12, E21, E22, E25, O41

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References

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Cited by

2020Welfare models and demand-led growth regimes before and after the financial and economic crisis 2019Financialisation and tendencies towards stagnation: the role of macroeconomic regime changes in the course of and after the financial and economic crisis 2007–09 2010Consumer debt and financial fragility 2017Wage-led versus profit-led demand: what have we learned? A Kaleckian–Minskyan view 2016Household consumer debt, endogenous money and growth: A supermultiplier-based analysis

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