Title Growth and inequality revisited: the role of primary distribution of income. A new approach for understanding today's economic and social crises
External publication No
Means Cambr. J. Econ.
Scope Article
Nature Científica
JCR Quartile 1
SJR Quartile 2
JCR Impact 2.07000
SJR Impact 0.76400
Area International
Publication date 01/03/2017
ISI 000398026500003
DOI 10.1093/cje/bew017
Abstract This paper presents an innovative interpretative scheme of the relationship between economic growth and income inequality, taking the primary distribution of income between profits and wages as the main explanatory variable. For that purpose, two lines of research are taken as a reference point: first, the Bhaduri-Marglin Model, which explains growth in terms of the effect that factor shares have on aggregate demand; and second, recent empirical analyses that also use the functional distribution to explain the evolution of the top income shares and the Gini index. After reviewing the literature on the growth-inequality relationship, the paper identifies several relationships between primary and interpersonal distributions of income in each of the Bhaduri-Marglin Model's growth regimes. It finds multiple causal relationships between growth and inequality as well as inequality and growth, clarifying their implications for economic and social stability. The paper offers final reflections on the way the scheme can further the understanding of current economic and social crises.
Keywords Functional distribution of income; Factor shares; Aggregate demand; Top incomes; Gini index
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