Soon Ryoo

Public debt and full employment in a stock-flow consistent model of a corporate economy

This paper examines the fiscal requirements for continuous full employment. We find that (i) changes in the financial behavior of households and firms require adjustments in tax rates and public debt, (ii) the stability of the steady-growth solution for public debt depends on the fiscal instrument and the household consumption function, (iii) in stable cases, a fall in government consumption (or a decline in another component of autonomous demand) requires an increase in the steady-growth ratio of public debt to capital, and (iv) the steady-growth tax rate may be positively or negatively related to the level of debt.

Public debt in an OLG model with imperfect competition: long-run effects of austerity programs and changes in the growth rate

Abstract In this paper we consider a modified version of Diamond’s OLG model. We show, first, that dynamic inefficiency may be relevant when the presence of imperfect competition is taken into account. Second, if fiscal policy is used to avoid inefficiency and maintain an optimal capital intensity, the required debt ratio will be inversely related to the growth rate. Third, austerity policies – reductions in government consumption and entitlement programs for the old generation – raise the required debt ratio.

Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective

The paper examines the determinants of income and wealth inequality in a Kaldorian model where the profit share adjusts to clear the goods market and the long-run output-capital ratio is constant. The approach is radically different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long-run adjustment of utilization. The Kaldorian model is used to identify several developments that may have caused increasing inequality in income and wealth since the early 1980s, including the shift of the power relation in corporate firms in favor of top managerial pay, the decline in the retention rate, increasing share buybacks, rising indebtedness of lower-income households, and the stock market boom in the 1990s. In contrast to Pikettys explanation, the decline in the natural rate of growth reduces inequality of income and wealth in this Kaldorian framework.