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Financialisation, income distribution and aggregate demand in the USA

Onaran, Özlem and Stockhammer, Engelbert and Grafl, Lucas (2011) Financialisation, income distribution and aggregate demand in the USA. Cambridge Journal of Economics, 35 (4). pp. 637-661. ISSN 0309-166X

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Official URL: http://dx.doi.org/10.1093/cje/beq045

Abstract

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.

Item Type:Article
Research Community:University of Westminster > Westminster Business School
ID Code:10124
Deposited On:06 Dec 2011 10:51
Last Modified:06 Dec 2011 10:51

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