Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run Growth

Posted: 8 Aug 2018

See all articles by Mark Setterfield

Mark Setterfield

New School for Social Research

Yun Kim

University of Massachusetts Boston - Department of Economics

Date Written: July 19, 2018

Abstract

We model US household debt accumulation during the neoliberal boom as a response to emulation effects and the decline of the social wage, which has "privatized" an increasing share of the costs of providing for services such as health and education. The debt dynamics of the US economy are then studied under alternative assumptions about the configuration of distributional variables, which is shown to differ across varieties of capitalism that have "neoliberalized" to different degrees. A key result is that distributional change alone will not make US neoliberal capitalism financially sustainable due, in part, to the paradoxical nature of inequality as a spur to household borrowing, and hence a source of both demand-formation and financial fragility. Achieving sustainability requires, instead, more wide-ranging reform.

Keywords: varieties of capitalism, neoliberalism, inequality, growth, financial fragility, financial sustainability

JEL Classification: E12, E44, O41

Suggested Citation

Setterfield, Mark and Kim, Yun, Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run Growth (July 19, 2018). Available at SSRN: https://ssrn.com/abstract=3216658

Mark Setterfield (Contact Author)

New School for Social Research ( email )

6 East 16th Street
New York, NY 10003
United States

Yun Kim

University of Massachusetts Boston - Department of Economics ( email )

100 Morrissey Blvd.
Boston, MA 02125
United States

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