Quotation De Carvalho, Laura, Rezai, Armon. 2016. Income inequality and aggregate demand. Cambridge Journal of Economics 40 (2), 491-505.




This paper presents a theoretical and empirical investigation of how changes in the size distribution of income can affect aggregate demand and the demand regime of an economy. After presenting empirical evidence for the US economy that the propensity to save increases significantly from the bottom to the top quintile of wage earners, we demonstrate that more equal distributions always lead to higher output in the traditional neo-Kaleckian macroeconomic model. We also present conditions under which a reduction of income inequality among workers results in demand becoming more wage led. This view is supported by the results of an econometric study for the USA (1967–2010), which show that the rise after 1980 in income inequality has made the US economy more profit led.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Cambridge Journal of Economics
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new VW-D, WH-B
Language English
Title Income inequality and aggregate demand
Volume 40
Number 2
Year 2016
Page from 491
Page to 505
Reviewed? Y
DOI http://dx.doi.org/10.1093/cje/beu085


Rezai, Armon (Details)
De Carvalho, Laura (Brazil)
Institute for Ecological Economics IN (Details)
Economics of Inequality FI (Details)
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