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Debt burden, investment, and profit-sharing

Author

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  • Kenshiro Ninomiya

    (Rikkyo University)

Abstract

This study examines the relationship among profit-sharing, debt burden, and investment. For example, firms are able to pay off debts by increasing their internal reserves. Reducing the debt burden promotes investment demand, which we regard as “the investment-led effect.” This study constructs a macrodynamic model of financial instability. That is, we consider the dynamic equation of debt burden and examine how the sharing parameter affects the dynamic system. We demonstrate that the normal profit-sharing rule makes the economy unstable, although we only consider the investment-led effect. We also show that Japan’s profit-sharing rule always makes the economy unstable.

Suggested Citation

  • Kenshiro Ninomiya, 2023. "Debt burden, investment, and profit-sharing," Evolutionary and Institutional Economics Review, Springer, vol. 20(2), pages 287-306, September.
    • Handle: RePEc:spr:eaiere:v:20:y:2023:i:2:d:10.1007_s40844-023-00267-7
    DOI: 10.1007/s40844-023-00267-7
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    More about this item

    Keywords

    Profit-sharing; Investment-led; Consumption-led; Financial instability and cycle;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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