Hein, Eckhard (2011): Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model.
Download (257Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model|
|Keywords:||Finance-dominated capitalism, distribution, household debt, financial fragility, growth, Kaleckian model|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E25 - Aggregate Factor Income Distribution
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes; Keynesian; Post-Keynesian
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
|Depositing User:||Eckhard Hein|
|Date Deposited:||14. Oct 2011 22:18|
|Last Modified:||12. Feb 2013 12:33|
Barba, A., Pivetti, M. (2009): Rising household debt: its causes and macroeconomic implications – a long-period analysis, Cambridge Journal of Economics, 33: 113-137.
Bhaduri, A. (2011a): Financialisation in the light of Keynesian theory, PSL Quarterly Review, 64 (256): 7-21.
Bhaduri, A. (2011b): A contribution to the theory of financial fragility and crisis, Cambridge Journal of Economics, advanced access: doi:10.1093/cje/ber011.
Bhaduri, A., Laski, K., Riese, M. (2006): A model of interaction between the virtual and the real economy, Metroeconomica, 57: 412-427.
Bibow, J. (2008): The international monetary (non-) order and the ‘global capital flows paradox’, in: Hein, E., Niechoj, T., Spahn, P., Truger, A. (eds.), Finance-led Capitalism? Macroeconomic Effects of Changes in the Financial Sector, Marburg: Metropolis.
Blecker, R.A. (2002): Distribution, demand and growth in neo-Kaleckian macro-models, in: Setterfield, M. (ed.), The Economics of Demand-led Growth, Cheltenham: Edward Elgar.
Boone, L., Girouard, N. (2002): The stock market, the housing market and consumer behaviour, OECD Economic Studies, No. 35: 175-200.
Charles, S. (2008a): Corporate debt, variable retention rate and the appearance of financial fragility, Cambridge Journal of Economics, 32: 781-795.
Charles, S. (2008b): A Post-Keynesian model of accumulation with a Minskyan financial structure, Review of Political Economy, 20: 319-331.
Charles, S. (2008c): Teaching Minsky’s financial instability hypothesis: a manageable suggestion, Journal of Post Keynesian Economics, 31: 125-138.
Cynamon, B., Fazzari, S. (2008): Household debt in the consumer age: source of growth – risk of collapse, Capitalism and Society, 3(2): 1-30.
Dreger, C., Slacalek, J. (2007): Finanzmarktentwicklung, Immobilienpreise und Konsum, DIW Wochenbericht, 74: 533-536.
Dutt, A.K. (2005): Conspicuous consumption, consumer debt and economic growth, in Setterfield, M. (ed.): Interactions in Analytical Political Economy. Theory, Policy and Applications, Armonk, New York: M.E. Sharpe.
Dutt, A.K. (2006): Maturity, stagnation and consumer debt: a Steindlian approach, Metroeconomica, 57: 339-364.
Dutt, A.K. (2011): Growth and income distribution: A post-Keynesian perspective, in: Hein, E., Stockhammer, E. (eds.), A Modern Guide to Keynesian Macroeconomics and Economic Policies, Cheltenham: Edward Elgar.
Epstein, G.A. (ed.) (2005): Financialization and the World Economy, Cheltenham: Edward Elgar.
Fitoussi, J.-P., Stiglitz, J. (2009): The ways out of the crisis and the building of a more cohesive world, OFCE Document de Travail, No. 2009-17, Paris: OFCE.
Guttmann, R. (2009): Asset bubbles, debt deflation, and global imbalances, International Journal of Political Economy, 38 (2): 46-69.
Gutttmann, R., Plihon, D. (2010): Consumer debt and financial fragility, International Review of Applied Economics, 24: 269-283.
Hein, E. (2004): Verteilung und Wachstum. Eine paradigmenorientierte Einführung unter besonderer Berücksichtigung der post-keynesianischen Theorie, Marburg: Metropolis.
Hein, E. (2006): Interest, debt and capital accumulation - a Kaleckian approach, International Review of Applied Economics, 20: 337-352.
Hein, E. (2007): Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model, Metroeconomica, 58: 310-339.
Hein, E. (2010a): Shareholder value orientation, distribution and growth – short- and medium-run effects in a Kaleckian model, Metroeconomica, 61: 302-332.
Hein, E. (2010b): A Keynesian perspective on ‘financialisation’, in: Arestis, P., Sawyer, M. (eds.), 21st Century Keynesian Economics, International Papers in Political Economy, Basingstoke: Palgrave Macmillan.
Hein, E. (2011a): Financialisation, re-distribution, and the financial and economic crisis – a Kaleckian perspective, in: Niechoj, T., Onaran, Ö., Stockhammer, E., Truger, A., van Treeck, T. (eds): Stabilising an Unequal Economy? Public Debt, Financial Regulation, and Income Distribution, Marburg: Metropolis.
Hein, E. (2011b): Redistribution, global imbalances and the financial and economic crisis – the case a Keynesian New Deal, International Journal of Labour Research, 3(1): 51-73.
Hein, E., Truger, A. (2010): Financial crisis, global recession and macroeconomic policy reactions – the case of Germany, in: Dullien, S., Hein, E., Truger, A., van Treeck, T. (eds.), The World Economy in Crisis – The Return of Keynesianism?, Marburg: Metropolis.
Hein, E., Truger, A. (2011): Finance-dominated capitalism in crisis – the case for a Keynesian New Deal at the European and the global level, in: Arestis, P., Sawyer, M. (eds), New Economics as Mainstream Economics, International Papers in Political Economy, Basingstoke: Palgrave Macmillan.
Hein, E., van Treeck, T. (2010a): ‘Financialisation’ in Post-Keynesian models of distribution and growth – a systematic review, in: Setterfield, M. (ed.), Handbook of Alternative Theories of Economic Growth, Cheltenham: Edward Elgar.
Hein, E., van Treeck, T. (2010b): ‘Financialisation’ and rising shareholder power in Kaleckian/Post-Kaleckian models of distribution and growth, Review of Political Economy, 22: 205-233.
Horn, G., Dröge, K., Sturn, S., van Treeck, T., Zwiener, R. (2009): From the financial crisis to the world economic crisis. The role of inequalitiy, IMK Policy Brief, October 2009, Duesseldorf: Macroeconomic Policy Institute (IMK) at Hans Boeckler Foundation.
Lavoie, M. (1992): Foundations of Post Keynesian Economic Analysis, Aldershot, Brookfield: Edward Elgar.
Lavoie, M. (1995): Interest rates in post-Keynesian models of growth and distribution, Metroeconomica, 46: 146-177.
Lazonick, W., O’Sullivan, M. (2000): Maximizing shareholder value: a new ideology for corporate governance, Economy and Society, 29 (1): 13-35.
Lima, G.T., Meirelles, A.J.A. (2007): Macrodynamics of debt regimes, financial instability and growth, Cambridge Journal of Economics, 31: 563-580.
Ludvigson, S., Steindel, C. (1999): How important is the stock market effect on consumption?, Federal Reserve Bank of New York Economic Policy Review, July: 29-51.
Mehra, Y.P. (2001): The wealth effect in empirical life-cycle aggregate consumption equations, Federal Reserve Bank of Richmond Economic Quarterly, 87(2): 45-68.
Meirelles, A.J.A., Lima, G.T. (2006): Debt, financial fragility, and economic growth: a Post Keynesian macromodel, Journal of Post Keynesian Economics, 29: 93-115.
Onaran, Ö., Stockhammer, E., Grafl, L. (2011): Financialisation, income distribution and aggregate demand in the USA, Cambridge Journal of Economics, forthcoming, advance access, doi:10.1093/cje/beq045.
Orhangazi, Ö. (2008): Financialisation and capital accumulation in the non-financial corporate sector: a theoretical and empirical investigation on the US economy: 1973-2003, Cambridge Journal of Economics, 32: 863-886.
Palley, T. (1994): Debt, aggregate demand, and the business cycle: An analysis in the spirit of Kaldor and Minsky, Journal of Post Keynesian Economics, 16: 371-390.
Palma, J.C. (2009): The revenge of the market on the rentiers. Why neo-liberal reports of the end of history turned out to be premature, Cambridge Journal of Economics, 33: 829-869.
Sapir, J. (2009): From financial crisis to turning point. How the US ‘subrime crisis’ turned into a world-wide one and will change the global economy, Internationale Politik und Gesellschaft, 1/2009: 27-44.
Stockhammer, E. (2004): Financialisation and the slowdown of accumulation, Cambridge Journal of Economics, 28: 719-741.
Stockhammer, E. (2010a): Income distribution, the finance-dominated accumulation regime, and the present crisis, in: Dullien, S., Hein, E., Truger, A., van Treeck, T. (eds.), The World Economy in Crisis - the Return of Keynesianism?, Marburg: Metropolis.
Stockhammer, E. (2010b): Neoliberalism, income distribution and the causes of the crisis, Research on Money and Finance, Discussion Paper No. 19, Department of Economics, SOAS.
UNCTAD (2009): The Global Economic Crisis: Systemic Failures and Multilateral Remedies, New York and Geneva: UNCTAD.
Van Treeck, T. (2008): Reconsidering the investment-profit nexus in finance-led economies: an ARDL-based approach, Metroeconomica, 59: 371-404.
Van Treeck, T. (2009): The political economy debate on ‘financialisation’ – a macroeconomic perspective, Review of International Political Economy, 16: 907-944.
Wade, R. (2009): From global imbalances to global reorganisations, Cambridge Journal of Economics, 33: 539-562.