Functional income distribution and aggregate demand in the Euro area

An increase in the wage share has contradictory effects on thesubaggregates of aggregate demand. Private consumption expendituresought to increase because wage incomes typically are associatedwith higher consumption propensities than capital incomes. Investmentexpenditures ought to be negatively affected because investmentwill positively depend on profits. Net exports will be negativelyaffected because an increase in the wage share corresponds toan increase in unit labour costs and thus a loss in competitiveness.Therefore, theoretically, aggregate demand can be either wage-ledor profit-led depending on how these effects add up. The resultswill crucially depend on how open the economy is internationally.The paper estimates a post-Kaleckian macro model incorporatingthese effects for the Euro area and finds that the Euro areais presently in a wage-led demand regime. Implications for wagepolicies are discussed.     

On the disaggregation of excess demand functions when prices and aggregate income vary independently

Under the assumption that prices and aggregate income can vary independently and that the income distribution scheme is known and homogeneous of degree 1 in prices and aggregate income, I raise the question of the restrictions on aggregate excess demand behavior implied by the postulate of rationality of individual agents. If the number of agents is at least as high as the number of commodities, aggregate excess demand need not satisfy, at a point, any restrictions other than homogeneity of degree 0 and Walras' law. Furthermore, if the number of agents, m, is less than the number of commodities, l, aggregate excess demand can be locally arbitrary when projected on an m-dimensional subspace of the commodity space.     

住房消费、收入分配与中国的消费需求不足

消费需求不足是中国目前经济增长结构的基本特征。本文通过对中国的居民消费支出率的重新度量,发现近年来中国的居民支出占GDP的比重相当稳定。在关于消费需求与劳动者报酬率的地区、城乡结构性特征分析的基础上,论文提出了提高劳动者报酬率、促进中国需求导向型经济增长必须要处理好的四个基本关系。     

The influence of the personal income distribution on private demand in Austria

Zusammenfassung In der vorliegenden Studie wird ein Modell entwickelt, das Auswirkungen von Umverteilungen der persönlichen Einkommen auf den privaten Konsum und die gesamtwirtschaftliche Nachfrage abbilden kann. Effekte auf die Angebotsseite können von solchen Modellen naturgemëß nicht erfaßt werden, woraus aber nicht auf die Geringschätzung dieser Effekte geschlossen werden soll und kann.Die Ergebnisse der Studie sind als eine erste Annäherung an diese wirtschaftspolitisch interessante Frage zu werten, da das vorhandene Datenmaterial keine exakte Quantifizierung zuläßt. Es läßt sich daher lediglich folgern, daß mit Hilfe von Umverteilungen der persönlichen Einkommen die Gesamtnachfrage in Österreich zumindest kurzfristig erhöht werden kann. Deutliche Auswirkungen sind jedoch nur bei relativ starken Eingriffen in die Verteilung zu erwarten — ein Ergebnis, das für hochentwickelte Länder allgemein gültig sein dürfte, da in diesen Ländern die Verteilung egalitärer als in wenig entwickelten ist.     

Capital income taxation when inherited wealth is not observable

This paper extends the Atkinson-Stiglitz model of direct and indirect taxation to a dynamic setting with two unobservable characteristics: productive ability and inherited wealth. Bequests are motivated by the ‘joy of giving’. A child’s inheritance is a random variable with a probability distribution that depends on his parent’s investment in a ‘bequest technology’. Public borrowing is assumed and implies the modified golden rule. We study the optimal tax policy when two instruments are available: a non-linear (wage) income tax and a proportional tax on capital income. We show that the second instrument ought, in general, to be used but that the tax rate is not necessarily positive. However, a positive tax rate is more likely when there is a positive correlation between inherited wealth and innate ability.     

Globalization and the effects of changes in functional income distribution on aggregate demand in Germany

Germany has experienced a period of extreme nominal and real wage moderation since the mid‐1990s. Contrary to the expectations of liberal economists, this has failed to improve Germany’s mediocre economic performance. However, Germany is now running substantial current account surpluses. One possible explanation for Germany’s disappointing performance is found in Kaleckian theory, which highlights that the domestic demand effect of a decline in the wage share will typically be contractionary, whereas net exports will increase (Blecker 1989 Blecker, R. 1989. International competition, income distribution and economic growth. Cambridge Journal of Economics, 13: 395–412. [Web of Science ®] [Google Scholar]). The size of the foreign demand effect will critically depend on the degree of openness of the economy. This paper aims at estimating empirically the demand side of a Bhaduri and Marglin (1990 Bhaduri, A. and Marglin, S. 1990. Unemployment and the real wage: The economic basis for contesting political ideologies. Cambridge Journal of Economics, 14: 375–93. [Crossref], [Web of Science ®] [Google Scholar]) type model for Germany. The paper builds on the estimation strategy of Stockhammer, Onaran, and Ederer (2009 Stockhammer, E., Onaran, Ö. and Ederer, S. 2009. Functional income distribution and aggregate demand in the Euro area. Cambridge Journal of Economics, 33(1): 139–59. [Crossref], [Web of Science ®] [Google Scholar]) and Hein and Vogel (2008 Hein, E. and Vogel, L. 2008. Distribution and growth reconsidered – empirical results for six OECD countries. Cambridge Journal of Economics, 32: 479–511. [Crossref], [Web of Science ®] [Google Scholar], 2009 Hein, E. and Vogel, L. 2009. Distribution and growth in France and Germany – single equation estimations and model simulations based on the Bhaduri/Marglin‐model. Review of Political Economy, 21(2): 245–72. [Taylor & Francis Online] [Google Scholar]). The main contribution lies in a careful analysis of the effects of globalization. Since Germany is a large open economy by now it is a particularly interesting case study.     

On the undesirability of commodity taxation even when income taxation is not optimal

An important result due to Atkinson and Stiglitz (1976) [Atkinson, A.B., Stiglitz, J.E., 1976. The design of tax structure: Direct versus indirect taxation. Journal of Public Economics 6, 55–75.] is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax (given weak separability of utility between labor and all consumption goods). This article demonstrates that this conclusion holds regardless of whether the income tax is optimal. In particular, given any commodity tax and income tax system, differential commodity taxation can be eliminated in a manner that results in a Pareto improvement. Also, differential commodity taxation can be proportionally reduced so as to generate a Pareto improvement. In addition, for commodity tax reforms that neither eliminate nor proportionally reduce differential taxation, a simple efficiency condition is offered for determining whether a Pareto improvement is possible.     

Functional income distribution and effective demand in India: An applied post Keynesian model

This article is an attempt to understand the relationship between functional income distribution and aggregate demand in India. To this end, the article (a) highlights trends in growth and class distribution of income in India; (b) constructs a post Keynesian macro model that links short run growth with profit share, where the latter is itself driven by movements in output and real exchange rate; (c) discusses and, wherever required, estimates key parameters relevant to the Indian case; and (d) simulates the model and discusses the effect of shocks to distributive as well as autonomous demand variables on growth performance. The article finds that, although a possibility of wage-led growth in India cannot be ruled out, by and large, distributive shocks do not have a strong impact on output growth. On the other hand, an increase in public expenditure growth, although it has a strong effect on output growth, tilts income distribution toward profit earners. A comprehensive agenda involving greater public expenditure and higher wages to stimulate growth and improve distribution is therefore recommended.     

Empowerment and intimate partner violence: Domestic abuse when household income is uncertain

Intimate partner violence is an important global health problem that remains ill understood. Several studies have documented that female empowerment may increase violence against women—the so‐called “male backlash.” We propose a utilitarian explanation for this phenomenon, based on the assumption that violence may be used as an instrument to affect the distribution of the household surplus between the spouses. Our main result is that promoting norms of gender equity (or otherwise enhancing the prospects of divorced women) may inadvertently promote violence against women in settings where production outcomes are uncertain.     

Impacts of the distribution of households across income groups in a differential demand system for orange juice

This study examines the effects of the distribution of households across income groups on the Rotterdam demand model’s income and price responses. The model’s marginal propensities to consume and Slutsky coefficients are specified as varying parameters dependent on the portions of households falling in different income categories. This specification was used to analyze the demand for different orange-juice products across 52 US cities. The results indicate that for these products the distribution of households across income groups is an important determinant of the model coefficients.     

Effects of income distribution on household income

The paper uses a complete model of price-independent-generalized-linear Engel equations with estimable income distribution effect parameter to compute average household income for twelve mutually exclusive groups of Australian families to highlight the bias of conventional weighted mean income published by national statistical offices for welfare analysis.     

Testing exact aggregation in income and household characteristics: the effects of aggregation across goods

Exact aggregation in income and household characteristics are tested using Canadian cross-sectional microdata. Over 100 data sets of homogeneous households are used, making it possible to conduct a large number of independent hypothesis tests. Tests are also conducted to determine whether the homogeneous household groups can be grouped into more heterogeneous data sets. Six different kinds of demand systems are estimated to ensure the robustness of the results to separability/aggregation structure.Exact aggregation in income, family size, region of residence and housing tenure status are strongly rejected, but exact aggregation in age of head of household is not. Restrictions which would allow pooling of households of different sizes, regions and tenure status are also strongly rejected. The test results exhibit a little sensitivity to the expenditure aggregates used, but not to the extent that the results would be different.The results imply that aggregate demand functions which use time series data should include many statistics from the joint distribution of income and household characteristics. In addition, when using data at the micro-level, the amount of heterogeneity in households' behaviour is much greater than usually assumed. This calls for the use of much more homogeneous household groups in the estimation of demand models than are typically employed.     

Exact aggregation of consumer demand systems

This paper is divided into two parts which deal with closely connected issues. The first section of the paper explores the structure of consumer demand systems necessary and sufficient for exact aggregation. The second section addresses a related empirical question: what, if anything, do the restrictions imposed on exactly aggregable demand systems buy the econometrician engaged in estimating integrable consumer demands? In particular, if the objective of an empirical exercise is to estimate the demand systems of individual utility maximizing consumers and only aggregate expenditure information and information on the income and demographic composition of the population are available, then under what conditions can the parameters of the estimated aggregate expenditure system be used to uniquely identify the parameters of the underlying individual demand systems?     

Dynamics of income distribution

In this paper, we have obtained closed-form solutions in Cass-Koopmans growth models with heterogeneous agents. The relationship between the form of the production function and the dynamics of income distribution is made explicit. We then use this relationship to determine what production structure is simultaneously consistent with facts on growth and income inequality. Our empirical findings give support to models with decreasing returns in the reproducible factor. JEL Classification: D3, O1, O4
Dans ce mémoire, les auteurs obtiennent des solutions pour des modèles de croissance à la Cass-Koopmans dans le cas où les agents sont hétérogènes. On explicite la relation entre la forme de la fonction de production et la dynamique de la répartition des revenus. On utilise alors cette relation pour déterminer quelle structure de production est arrimée aux faits connus à la fois quant à la croissance économique et à la répartition des revenus. Les résultats empiriques supportent les modèles où les rendements sur les acteurs de production reproductibles sont décroissants.     

Measures of inequality as an aggregation of individual preferences about income distribution: The arrowian case

An inequality preorder is a preorder on a simplex which satisfies symmetry and strict Schur-convexity (the mathematical equivalent of the principle of transfers of Pigou and Dalton). It is shown that we cannot aggregate individual inequality preorders to a collective one if we are interested in Arrow's aggregation rules. The proof uses an interesting result of Kalai, Muller and Satterthwaite (Public Choice 34 (1979), 87–97). Moreover, we prove further results for the aggregation of individual inequality indices when we allow cardinality and interpersonal comparibility of utility.