Social and Behavioral Sciences Commons^™

Demand Driven Growth And Two Class Capital Distribution With Applications To The United States, Rishabh Kumar, Christian Schoder, Siavash Radpour

Economics Faculty Publications

We present a structuralist growth and distribution model of capitalists and workers. Our model highlights the role of class-differentiated savings propensities as well as an independent accumulation function in determining the dynamics of wealth distribution in the long run. At the steady state, investment parameters do not influence the distribution of wealth but there exists a long run paradox of thrift effect, which distributes wealth to capital- ists whilst simultaneously exerting downward pressure on the long run state of aggregate demand. Applied to annual US data from 1950-2015 using the Metropolis-Hastings algorithm we find that the share of capitalist wealth …