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PKSG Working Paper Series

Working Paper PKWP1412

A Steindlian account of the distribution of corporate profits and leverage: A stock-flow consistent macroeconomic model with agent-based microfoundations

November 2014

Jo Michell

Post Keynesian economics has largely forgotten Steindl's insight that monopolisation of the corporate sector redistributes profits to those firms least likely to invest them productively. Agent-based methods can be used to incorporate Steindl's insights into a simple stock- flow consistent model of the monetary circuit. This model illustrates the `maldistribution of profits' and `enforced indebtedness' of heterogeneous firms alongside the tendency towards stagnation that occurs with rising monopolisation. The model also demonstrates Minsky's assertion that firms' leverage rises over the business cycle can be reconciled with Kalecki's macroeconomic identities showing that profits are `financed' by the investment expenditures of firms.

Keywords: Stock-flow consistent, heterogeneous agents, post-Keynesian

JEL classification: C63: Computational Techniques; Simulation Modeling E16: General Aggregative Models: Social Accounting Matrix E22: Investment; Capital; Intangible Capital; Capacity E25: Aggregate Factor Income Distribution E42: Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems

Download: Working Paper PKWP1412