The Korean Journal of Economic Studies
A Study on the Economic Effects of Redistributive Policy in the Kaleckian Model of Growth
Min-Chang Ko (Wonkwang University)Year 2016Vol. 64No. 4
Abstract
This paper presents a Kaleckian model of growth and distribution withbudget deficits and examines the effects of redistributive policy on theeconomy. Furthermore, it analyzes the economic effects of redistributive policyunder the assumption of balanced budget. The important research results areas follows. First, government spending for social security has smaller effectson the economy than those of discretionary government purchase because ofits role of automatic stabilizer. Second, the exhilarationist regime as well asthe stagnationist regime can emerge depending on the relative size of the taxrates for wage and capital income. Third, the tax rate for wage income has noeffect on the economy and only the tax rate for capital income has an impacton the economy, when the government pursuits balanced budget. This resultis reminiscent of the theoretical implication of the Cambridge equation thatworkers’ propensity to save does not affect the profit rate in the steady state,while capitalists’ propensity to save only influences the profit rate. Lastly, thetax rate for the capital income exerts a positive influence on the economyunder the assumption of balanced budget, since the decrease in consumptionexpenditure due to the payment of the capital income tax is smaller than theleakage of the capital income tax, which is again injected into the circular flowof the economic system as a component of government expenditure.