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

Hein, Eckhard (2011): Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Finance-dominated capitalism, distribution, household debt, financial fragility, growth, Kaleckian model
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

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