This paper studies two formal models of long run growth with a medium-run distributive cycle, both of which feature causal links from the rise in inequality to a deterioration of long run macroeconomic performance. Both versions feature an endogenous income-capital ratio: one through the Keynesian notion of effective demand, the other building on induced bias in technical change. A key focus of the analysis is on the assumptions necessary in both frameworks to generate policy implications consistent with the observed decline of the labor share, the income-capital ratio, and labor productivity growth during the neoliberal era. Importantly, both theories: (a) provide space for mutually reinforcing pro-labor and pro-growth policies in the long run, although they differ in the mechanisms at play in these processes; (b) imply a potential tradeoff between pro-labor policies and growth on one hand, and long-run employment on the other; (c) are consistent with the evidence on the distributive cycle at business cycle frequency.

Classical and Keynesian models of inequality and stagnation / Rada, C.; Tavani, D.; von Arnim, R.; Zamparelli, L.. - In: JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION. - ISSN 0167-2681. - 211:(2023), pp. 442-461. [10.1016/j.jebo.2023.05.015]

Classical and Keynesian models of inequality and stagnation

Zamparelli L.
2023

Abstract

This paper studies two formal models of long run growth with a medium-run distributive cycle, both of which feature causal links from the rise in inequality to a deterioration of long run macroeconomic performance. Both versions feature an endogenous income-capital ratio: one through the Keynesian notion of effective demand, the other building on induced bias in technical change. A key focus of the analysis is on the assumptions necessary in both frameworks to generate policy implications consistent with the observed decline of the labor share, the income-capital ratio, and labor productivity growth during the neoliberal era. Importantly, both theories: (a) provide space for mutually reinforcing pro-labor and pro-growth policies in the long run, although they differ in the mechanisms at play in these processes; (b) imply a potential tradeoff between pro-labor policies and growth on one hand, and long-run employment on the other; (c) are consistent with the evidence on the distributive cycle at business cycle frequency.
2023
distributive cycles, induced technical change, Keynesian growth models
01 Pubblicazione su rivista::01a Articolo in rivista
Classical and Keynesian models of inequality and stagnation / Rada, C.; Tavani, D.; von Arnim, R.; Zamparelli, L.. - In: JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION. - ISSN 0167-2681. - 211:(2023), pp. 442-461. [10.1016/j.jebo.2023.05.015]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1684302
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