Thrift, Stagnation and Wealth Distribution in a Two Class Economy

Rishabh Kumar
Written By SCEPA

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A two class (rentiers and workers) model of growth and distribution is applied to the study of long run stagnation in aggregate demand.

In our theoretical framework, capitalists can accumulate a higher share of wealth on the balanced growth path while simultaneously reducing the measure of aggregate demand for the entire economy. Applied to trends over 1979-2010, we find the US economy to represent the kind of stylized economy which would be prone to falling output capital ratios due to increased savings rate differentials in its income and wealth ranking.

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