Secular Stagnation and Income Redistribution Policy: A Long-Run Kaleckian Approach

This study investigates how the income redistribution policy affects economic growth, employment, income distribution, income inequality, and asset inequality in the context of "secular stagnation." The income redistribution policy is defined as one that imposes capital taxation on capitalists and redistributes it to workers. For this purpose, we construct 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 obtain 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.