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PKSG Working Paper Series

Working Paper PKWP1805

Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010

March 2018

Engelbert Stockhammer, Joel Rabinovich, Niall Reddy

Most empirical macroeconomic research limited to the period since World War II. This paper analyses the effects of changes in income distribution and in private wealth on consumption and investment covering a period from as early as 1855 until 2010 for the UK, France, Germany and USA, based on the dataset of Piketty and Zucman (2014). We contribute to the post-Keynesian debate on the nature of demand regimes, mainstream analyses of wealth effects and the financialisation debate. We find that overall domestic demand has been wage-led in the USA, UK and Germany. Total investment responds positively to higher wage shares, which is driven by residential investment. For corporate investment alone, we find a negative relation. Wealth effects are found to be positive and significant for consumption in the USA and UK, but weaker in France and Germany. Investment is negatively affected by private wealth in the USA and the UK, but positively in France and Germany.

Keywords: historical macroeconomics, demand regimes, Bhaduri-Marglin model, wealth effects, financialisation

JEL classification: B50: Current Heterodox Approaches: General E11: General Aggregative Models: Marxian; Sraffian; Kaleckian E12: General Aggregative Models: Keynes; Keynesian; Post-Keynesian E20: Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) E21: Macroeconomics: Consumption; Saving; Wealth N10: Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative

Download: Working Paper PKWP1805