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Debt-driven growth? Wealth, distribution and demand in OECD countries

Research output: Working paper

Engelbert Stockhammer, Rafael Wildauer

Original languageEnglish
Place of PublicationKingston upon Thames, U.K.
PublisherFaculty of Arts and Social Sciences, Kingston University
Publication statusPublished - 1 Feb 2015

Publication series

NameEconomics Discussion Paper
PublisherFaculty of Arts and Social Sciences, Kingston University

King's Authors

Abstract

The paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components. We extend the Bhaduri and Marglin (1990) model to include personal income inequality as well as asset prices and debt. This allows for an evaluation of the wage or profit-led nature of demand regimes, of the expenditure cascade argument (Frank et al. 2010) and several hypotheses regarding the effects of wealth and debt. Our estimates are based on a panel of 18 OECD countries covering the period 1980-2013. For the full panel the average demand regime is found to be wage led. We fail to find effects of personal inequality, but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis.

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