Endogenous Income: Distribution and Aggregate Demand A Proposal of a Dynamic Model from a KaleckianApproach


Although the relationship between the functional distribution of income and aggregate demand is widely discussed in Post-Keynesian economics literature, these theoretical models are mostly based on the assumption of exogenous profit share and assume that productivity does not change during the growth process. However, the value of aggregate demand, capital accumulation, and wages or profits are determined endogenously, and the interaction between distribution and aggregate demand may change depending on labor productivity, considering the productivity-enhancing effect of higher aggregate demand and real wages. This study aims to investigate the relationship between effective demand, income distribution, and labor productivity theoretically in the context of Post-Keynesian/Kaleckian theory, and elaborates a demand-led growth model where income distribution is endogenized, in contrast to previous Kaleckian distribution and growth models that mostly based on the assumption of exogenous profit share. Functional distribution of income and labor productivity can be endogenized by Rowthorn’s conflicting claims over distribution by workers and firms and the Kaldor-Verdoon law, respectively. The implications of the theoretical modindicatetes that lowering unit labor costs through the suppression of real wages may have a limited role in increasing investment, and that the contractionary effects of insufficient domestic demand on the economy due to the decrease in the wage share cannot be eliminated. Thus, redistribution of income from labor to capital is not a precondition for achieving higher investment and growth rates.


: Income distribution effective demand endogenous growth wage-led growth Kaleckian models