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Finance and distribution

Ramaa Vasudevan

Keywords: distribution; finance; post-Keynesian

This paper investigates this interaction of demand and distributional dynamics, in the context of the rise to dominance of finance and the associated phenomenon of ‘financialization.’ The phenomenon has involved on the one hand an increasing recourse to debt in order to finance consumption, and on the other rising claims of shareholders on the profits of corporations along with a transformation of the orientation of corporations towards financial returns. We present two versions of the basic post-Keynesian model in order to address the implications of a dominant shareholder class and rising debt-driven consumption on demand. We distinguish two demand regimes, finance-led and finance-burdened, and investigate the interaction of demand and distribution in these regimes.

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