Functional Distribution, Capital Accumulation and Growth in a Non-Linear Macrodynamic Model
AbstractThe article develops a macrodynamic model of income distribution, capital accumulation, and growth in which investment is nonlinear in distribution: at intermediate and high (low) levels of wage share, the impact of a higher profit share on investment plans is positive (negative). This specification conforms with some of the empirical evidence for the rise and fall of the Golden Age in several advanced economies. As it turns out, whether the economy follows a wage-led growth regime or a profit-led one depends on the prevailing distribution. Indeed, a similar dependence applies, alongside the relative bargaining power of capitalists and workers and the cyclical behavior of mark-ups, to the dynamic stability properties of the economy.