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Macroeconomic effects of personal and functional income inequality: Theory and empirical evidence for the US and Germany
Ist Teil von
Panoeconomicus, 2018, Vol.65 (3), p.289-318
Ort / Verlag
Novi Sad: The Associations of Economists of Vojvodina
Erscheinungsjahr
2018
Quelle
EZB Electronic Journals Library
Beschreibungen/Notizen
This paper presents a simple post-Kaleckian model of distribution and growth
that incorporates personal income inequality and interdependent social
norms. The model shows in an easily accessible manner that macroeconomic
effects of changes in personal and functional income distribution can
potentially reinforce or dampen each other. The resulting variety of demand
and growth regimes is due to different distributional effects on consumption
demand. Therefore, the second part of the paper investigates the empirical
relevance of the additional demand regimes by estimating aggregate
consumption functions with variables for personal and functional income
distribution for the United States and Germany. We find similar effects of
functional income distribution for both countries. However, for the US, we
find positive long-run effects of personal income inequality on consumption.
The effect is strongest for the top 10% income share and the Gini index and
less strong for the top 5% and 1% income shares. While this is evidence for
relative consumption patterns, it also supports the view that the ?super
rich? are a relatively distant class for most people - questioning the
notion of expenditure cascades from the very top to the very bottom. In
contrast, for Germany we fail to find compelling evidence for effects of
personal income distribution.
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