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18 Jan 2021 02:12:12 UTC
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Debt-driven Growth? Wealth, Distribution and Demand in OECD Countries
Author: Rafael Wildauer
File Type: pdf
Debt-driven Growth? Wealth, Distribution and Demand in OECD CountriesAbstract 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. Forthe full panel the average demand regime is found to be wage led. We fail to find effects ofpersonal inequality, but do find strong effects of debt and property prices which have been themajor drivers of aggregate demand in the decade prior to the 2007 crisis.
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