Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277327 
Year of Publication: 
2015
Citation: 
[Journal:] European Journal of Economics and Economic Policies: Intervention (EJEEP) [ISSN:] 2052-7772 [Volume:] 12 [Issue:] 2 [Year:] 2015 [Pages:] 170-182
Publisher: 
Edward Elgar Publishing, Cheltenham
Abstract: 
US household demand is well below its trend from prior to the Great Recession. We link weak demand to rising income inequality. The demand problem did not arise contemporaneously with higher income inequality because the bottom 95 percent of the income distribution went deeply into debt to maintain consumption growth despite their stagnant income growth. But we argue that the demand impact of greater inequality did appear in the aftermath of the recession. A calibrated Keynesian growth model shows that the lower income share of the bottom 95 percent can explain the deviation of the US economy from its pre-recession trend.
Subjects: 
aggregate demand
consumption
saving
household
national income and product accounts
JEL: 
D31
E01
E12
E21
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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