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Income Redistribution Policy, Growth, Inequality, and Employment: A Long-Run Kaleckian Approach

Author

Listed:
  • Sasaki, Hiroaki
  • Sonoda, Ryunosuke

Abstract

This study investigates how the income redistribution policy affects economic growth, employment, income distribution, income inequality, and asset inequality. The income redistribution policy is defined as one that imposes capital taxation on capitalists and redistributes it to workers. Therefore, we constructed a Kaleckian model in which, in addition to capitalists, workers own capital stock through savings. Depending on the relative size of workers' and capitalists' saving rates, we obtained the Pasinetti equilibrium, in which both classes coexist, and the dual equilibrium, in which only workers own capital stock, whereas capitalists do not. In the Pasinetti equilibrium, raising the tax rate for capitalists drives an increase in workers' assets and income shares. Simultaneously, economic growth and employment rates increase when the short-run equilibrium is wage-led growth whereas they decrease when the short-run equilibrium is profit-led growth. Hence, the income redistribution policy is effective in reducing inequality and promoting economic growth and employment when the short-run equilibrium is wage-led.

Suggested Citation

  • Sasaki, Hiroaki & Sonoda, Ryunosuke, 2024. "Income Redistribution Policy, Growth, Inequality, and Employment: A Long-Run Kaleckian Approach," MPRA Paper 121968, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:121968
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    workers' saving; income equality; income redistribution policy; growth; employment;
    All these keywords.

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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