Income distribution and aggregate demand
Introduction
This empirical study seeks to examine the interaction between income distribution and so-called real economic development.
The debate on this question in Finland has been marked either by excessive export-centredness or by an unrealistic conception of a perfectly competitive economy. In this framework, for example, a rise in real earnings — all else remaining equal — has always been expected to have a negative effect on both output and employment.
Thinking that strives for realism must, however, take into account the effects of changes in income distribution on consumption demand as well. The so-called underconsumption theories have sought to emphasise this aspect.
Changes in income distribution undoubtedly have contradictory effects when considered in terms of the growth of demand, output, and employment. The outcome evidently cannot be derived by reflection alone. The need for empirical research to clarify the question is clear.
Income distribution is a fairly multidimensional concept. Accordingly, a distinction is made between gross income distribution and the distribution of disposable income. It is evident that both gross income distribution and the distribution of disposable income are of significance for real economic events, and vice versa. For a number of reasons, however, this study has been obliged to confine itself to gross income distribution only.
The analysis is fairly short-term in character. This is due in part to the gap that can currently be said to exist between short-term and long-term analyses of economic events. Bridging this gap is not, at this stage, primarily the task of empirical research. (AI translation)
- ISSN: 0358-5980
- ISBN: 951-9281-08-8
