Pro-shareholder income distribution, debt accumulation, and cyclical fluctuations in a post-Keynesian model with labor supply constraints

European Journal of Economics and Economic Policies: Intervention, 2014, vol. 11, issue 1, 10-30

Abstract: In modern capitalist economies, income distribution has a tendency to be in favor of shareholders. This paper interprets pro-shareholder distribution as a decrease in the retention ratio of firms and an increase in the profit share. We introduce labor supply constraints into a post-Keynesian growth model with debt accumulation and investigate the effects of changes in the natural rate of growth, retention ratio, profit share, and interest rate on the rate of capacity utilization and the financial structure of firms. We further analyse the stability of the steady-state equilibrium and the transitional dynamics toward the equilibrium and show that, depending on conditions, there could be cyclical fluctuations such that the financial structure changes periodically between speculative finance and Ponzi finance.

Keywords: financial structure; labor supply constraints; post-Keynesian model; cyclical fluctuations (search for similar items in EconPapers)
JEL-codes: E12 E21 E22 E32 E44 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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