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This paper deals with two intrinsically linked issues: the endogeneity of the demand regime and the personal distribution impact on aggregate demand. By assuming that saving is a function of personal rather than functional income distribution, an increase of the labour share is effective in boosting consumption and aggregate demand, not per se, but only as long as it reduces personal inequality. As the labour share increases, both the demand regime type—the sign of the slope of the demand schedule—and its strength—the size of the slope of the demand schedule - can endogenously change. Concerning the former, there can be a threshold value for the wage share beyond which there is a shift from wage-led to profit-led demand. The analysis shows that, unlike most Kaleckian models, profit inequality is just as important as wage inequality in determining the demand regime type and its strength.

Kaleckian literature is considered an important theme in the post-Keynesian school of economic thought. In the aftermath of the financial crisis, the endeavors of forming a new consensus regarding essential economic issues, in particular achieving economic growth became a need. Thus, the Kaleckian models returned to be in the spot since these models tackle the impact of changes in the distribution of income and address the question whether a redistribution of income away from wages and towards profits is capable of boosting growth. In this sense, this paper return to Kaleckian insights and offers a theoretical discussion of the distributional effects on aggregate demand and economic growth. Moreover, through the lens of neo-Kaleckian tradition, the evolution of the debate on wage-led and profit-led regimes in recent decades can be traced. RESUMO A literatura kaleckiana é considerada um tema importante na escola pós-keynesiana de pensamento econômico. No rescaldo da crise financeira, os esforços para a formação de um novo consenso sobre as questões econômicas essenciais, em particular o crescimento econômico, tornaram-se uma necessidade. Assim, os modelos kaleckianos voltaram a estar em evidência, uma vez que esses modelos enfrentam o impacto das mudanças na distribuição da renda e questionam se uma redistribuição da renda fora dos salários para o lucro é capaz de impulsionar o crescimento. Nesse sentido, este artigo retorna aos insights kaleckianos e oferece uma discussão teórica dos efeitos distributivos sobre a demanda agregada e o crescimento econômico. Além disso, através das lentes da tradição neokaleckiana, pode-se rastrear a evolução do debate sobre os regimes movidos pelos salários e pelos lucros nas últimas décadas.

This paper generalizes the principle of effective demand to incorporate banking and finance as two distinct sectors. The traditional commercial banking sector is regulated and the modern shadow banking sector is mostly an unregulated provider of financial services. Through a stylized model the interconnectedness between the two sectors is analysed. The analysis shows how an almost infinite supply-side capacity of finance is created and explores its relation to the level of aggregate demand in the real economy. The impact of finance on the real economy is explored in both profit- and wage-led regimes at different levels of interconnectedness between commercial and investment banking.

The conventional view argues that devaluation increases the price competitiveness of domestic goods, thus allowing the economy to achieve a higher level of economic activity. However, these theoretical treatments largely neglect two important effects following devaluation: (1) the inflationary impact on the price of imported intermediate inputs, which raises the prime costs of firms and deteriorates partially or totally their price competitiveness; and (2) the redistribution of income from wages to profits, which ambiguously affects the aggregate demand as workers and capitalists have different propensities to save. New structuralist economists have explored these stylized facts neglected by the orthodox literature and, by and large, conclude that devaluation has contractionary effects on growth and positive effects on the external balance. Given that empirical evidence on the correlation between devaluation and growth is quite mixed, we develop a more general Keynesian–Kaleckian model that takes into account both opposing views in order to analyze the net impact of currency depreciation on the short-run growth rate and the current account. We demonstrate that this impact can go either way, depending on several conditions such as the type of growth regime, that is, wage-led or profit-led, and the degree of international price competitiveness of domestic goods.

The distinction between wage-led and profit-led growth is a major feature of Post-Keynesian economics and it has triggered an extensive econometric literature aimed at identifying whether economies are wage or profit-led. That literature treats the economy's character as exogenously given. This paper questions that assumption and shows an economy's character is endogenous and subject to policy influence. This generates a Post-Keynesian analogue of the Lucas critique whereby the econometrically identified character of the economy depends on policy rather than being a natural characteristic. Over the past twenty years, policy has made economies appear more profit-led by lowering workers' share of the wage bill and tax rates on shareholder income. Increasing workers' wage bill share increases growth and capacity utilization regardless of whether the economy is wage-led, profit-led or conflictive. That speaks to making it the primary focus of policy efforts.

International audience; The primary motivation of this paper is to analyse the relationship between the functional income distribution and the Chinese economic growth for the period 1978-2010. We employ a demand-driven Kaleckian macroeconomic framework to evaluate the total effects of changes in the labour and profit income shares on components of final demand. It is one of the first applications of such a model to the Chinese economy. We use the theoretical model of Stockhammer, Onaran and Ederer (2009) one of the Bhaduri and Marglin (1990) seminal paper variants. This model shows that in a growth model driven by effective demand, long-run growth may be led either by wage or profit under some conditions. It then engenders an empirical problem to determine the characteristics of an accumulation regime in a given country. We utilise single equations to estimate the effects of the labour and profit income shares on the demand aggregates of China, namely consumption, investment and net exports. One of our contributions is reconstructing t the statistical series for the period 1978-2010 to check the data, correct inconsistencies and be sure of their meaning as far as possible. The increase of labour income turns out to have a low impact on consumption for the whole period. As expected, an increment in the profit share promotes investment. However, changes in the labour income share turn out to have no impact on net exports. The total effect suggests that the accumulation regime in China is profit-led.

This paper examines how variable output and profit share jointly determine investment and saving, while the difference between investment and saving determines the changes in output and profit share. Analysis of the resulting pair of differential equations yields novel implications for the multiplier process. In this more general framework a number of separate strands of the Keynesian inspired literature can be understood. In particular the model incorporating both forced saving and profit squeeze analyses stability of the dynamical system to bring out the complex relation between in- and out-of-equilibrium profit- and wage-led regimes.