nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2013‒02‒03
four papers chosen by
Karl Petrick
Western New England University

  1. A Theory of Aggregate Consumption By Yun Kim; Mark Setterfield; Yuan Mei
  2. Raising the Social Security Payroll Tax Cap: How Many Workers Would Pay More? By Nicole Woo; John Schmitt; Janelle Jones
  3. The effect of financialization on labor's share of income By Dünhaupt, Petra
  4. Is inclusive development a sustainable development? : A political economic perspective By Pushparaj, Soundararajan

  1. By: Yun Kim (Department of Economics, Trinity College); Mark Setterfield (Department of Economics, Trinity College); Yuan Mei (Department of Economics, University of Chicago)
    Abstract: We develop a Keynesian model of aggregate consumption. Our theory emphasizes the importance of the relative income hypothesis and debt-finance for understanding household consumption behavior. It is shown that particular importance attaches to how net debtor households service their debts, and that the treatment of debt servicing commitments as a substitute for savings by these households creates the potential for “sudden stops” in consumption spending (and hence aggregate demand). The implications for aggregate consumption of changes in the distribution of income and changes in the composition of employment are also explored.
    Keywords: Consumption, household borrowing, household debt, relative income hypothesis
    JEL: E12 E21
    Date: 2013–01
  2. By: Nicole Woo; John Schmitt; Janelle Jones
    Abstract: On January 1, the maximum amount of annual earnings subject to the Social Security tax – a.k.a. the payroll tax cap – increased to $113,700. Every year, this cap is adjusted to keep up with inflation. Many Americans are not aware that income above the cap is not taxed by Social Security. In other words, workers who make $113,700 or less per year pay a higher Social Security payroll tax rate than those who make more. To help alleviate Social Security’s long-term budget shortfall, raising – or even eliminating – the cap has gotten some attention from policy makers. This paper finds that just 1 in 20 workers -- the wealthiest -- would be affected if the cap were eliminated entirely, and only 1 in 75 would be affected if the cap were applied to earnings over $250,000. In addition, the share of workers who would pay more varies greatly according to gender, race, state and age.
    Keywords: CPI, social security, social security cap, inequality, payroll tax cap,
    JEL: H H5 H55 H2 H3
    Date: 2013–01
  3. By: Dünhaupt, Petra
    Abstract: Numerous studies have analyzed the decline in labor's share of income, but only few have linked it to the increase in financialization. The process of financialization can roughly be described as an increasing importance of the financial sector which had an impact on the distribution between wages and profits on the one hand, and retained earnings and financial income in the form of dividends and interests on the other hand. This paper seeks to explore the relationship between financialization and labor's share of income using a time-series cross-section data set of 13 countries over the time period from 1986 until 2007. The results suggest that there is indeed a relationship between increasing dividend and interest payments of non-financial corporations and the decline of the share of wages in national income. Other factors that can be accounted for the decline relate to globalization and a decrease in the bargaining power of labor. --
    Keywords: Financialization,functional income distribution,labor's share
    JEL: E25 E44 F4
    Date: 2013
  4. By: Pushparaj, Soundararajan
    Abstract: A major development policy challenge in the contemporary economic policy discourse is to sustain the development momentum. Prevailing political economic realities influence the economic thinking to accommodate the political compulsions. The inclusive development is one such development strategy. Inclusive development is not a mere political pragmatism but a sensible development strategy. This paper discusses the relevance of distributive justice in relation to civil disturbance across and within national boundaries in the context of sustainable development. This paper argues that the inclusive development guarantees the sustainable development. Further, argues for the revival of welfare state for sustainable development.
    Keywords: Sustainable Development; Inclusion; Inequality; Distributive Justice; Civil unrest
    JEL: D63 Q01 P16
    Date: 2013–01–23

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