Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204585 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 126/2019
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
This paper develops a stylized short-run neo-Kaleckian model incorporating personal income inequality and income taxes based on You and Dutt (1996). The main goal is to investigate how changes in income taxes and personal income distribution affect output growth. The theoretical discussion of the stylized model is then empirically assessed, using data for Italy retrieved from the Survey of Household Income and Wealth published by the Bank of Italy. The empirical analysis confirms both the heterogeneity of the propensities to consume of Italian households and the dominance of absolute income effects in the Italian consumer behavior that assures the negative trade-off between inequality and aggregate demand. More specifically, it is shown that, overall, Italians are still income constrained, not allowing for a compensation of the demand-depressing effects of raising inequality via debt and wealth-based consumption. Likewise, it is argued that decreasing personal income inequality via progressive income tax reforms would have positive effects on aggregate demand, utilization, and growth.
Subjects: 
Income inequality
Personal Income Distribution
Income Taxes
Kaleckian model
JEL: 
D11
D12
D31
E12
E21
H24
Document Type: 
Working Paper

Files in This Item:
File
Size
957.29 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.