Open AccessFinancialisation, income distribution and aggregate demand in the USA
Author(s) -
Özlem Onaran,
Engelbert Stockhammer,
Lucas Grafl
Publication year - 2011
Publication title -
cambridge journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.261
H-Index - 83
eISSN - 1464-3545
pISSN - 0309-166X
DOI - 10.1093/cje/beq045
Subject(s) - economics , redistribution of income and wealth , consumption (sociology) , aggregate demand , income distribution , investment (military) , distribution (mathematics) , dividend , aggregate income , redistribution (election) , labour economics , monetary economics , wage , macroeconomics , unemployment , inequality , finance , social science , sociology , politics , political science , law , monetary policy , mathematical analysis , mathematics
This paper investigates the effects of financialisation and functional income distribution on aggregate demand in the USA by estimating the effects of the increase in rentier income (dividends and interest payments) and housing and financial wealth on consumption and investment. The redistribution of income in favour of profits suppresses consumption, whereas the increase in the rentier income and wealth has positive effects. A higher rentier income decreases investment. Without the wealth effects, the overall effect of the changes in distribution on aggregate demand would have been negative. Thus a pro-capital income distribution leads to a slightly negative effect on growth, i.e. the USA economy is moderately wage-led. Copyright The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.
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