Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective

Abstract

Abstract The paper examines the determinants of income and wealth inequality in a Kaldorian model. The approach is different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long‐run adjustment of utilization. The analysis identifies several developments that may have increased inequality since the 1980s, including the shift of the power relation in favor of top managerial pay, the decline in the retention rate, increasing share buybacks, rising indebtedness of lower‐income households and stock market booms. In contrast to Piketty's explanation, the decline in the natural growth rate reduces inequality in this Kaldorian framework.

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