Income Distribution, Growth, and Conflict: The Aggregate Demand Nexus

Onaran, Özlem
This paper is a literature review on the recent Post-Keynesian empirical findings about the effect of income distribution on investment and growth in a variety of different countries and aims at discussing the policy implications of this literature. The core question is the following: Are actual economies wageled or profit-led? Current orthodoxy implicitly assumes that they are profit-led, and thus supports the neoliberal policy agenda. The merit of the Post- Keynesian/Kaleckian models is that they highlight the dual function of wages as a component of aggregate demand as well as a cost item. If an economy is not profit-led, then there is room for policies targeting growth and income distribution simultaneously. However, the economies are indeed dynamic in the sense that beyond a point an economy can shift from a wage-led to a profit-led regime, with an intensified distributional conflict.


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Citation Formats
Ö. Onaran, “Income Distribution, Growth, and Conflict: The Aggregate Demand Nexus,” ODTÜ Gelişme Dergisi, vol. 35, no. 1, pp. 209–224, 2008, Accessed: 00, 2020. [Online]. Available: