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

By Jo Michell

PKES Working Paper 1412

November 2014

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 E16 E22 E25 E42