Wildauer, Rafael and Stockhammer, Engelbert (2015) Schuldengetriebenes Wachstum – Nachfrageffekte von Ungleichheit, Vermögenspreisen und Haushaltsverschuldung [Debt-driven growth - demand effects of inequality in assets and liabilities and household debt]. Wirtschaft und Gesellschaft [Economy and Society], 41(4), pp. 497-518. ISSN (online) 0378-5130

Abstract

Prior to the 2007 financial crisis, the majority of OECD countries experienced three common trends: An increasingly unequal distribution of incomes, fast growing liabilities of private households and above inflation rises in real estate and financial asset prices. This article investigates how these trends influenced growth dynamics between 1980 and 2013. By relying on a panel of 18 OECD countries consumption, investment, export and import functions are estimated in order to assess the impact of income distribution, assets and debt on economic growth. The results indicate a wage-led demand regime for the overall panel. Thus a falling wage share reduces aggregate demand. Effect size computations reveal however, that in the period 1997-2007 neither changes in the wage nor top income shares had a recognizable direct impact on economic growth. In contrast, the rise of house prices and private sector liabilities, explain one third of GDP growth over that period for the entire dataset. In the case of English-speaking countries and southern member states of the Eurozone, rising asset prices and liabilities explain up to 50% of the income increases in the decade 1997-2007. After these bubbles burst, declining asset prices had a negative impact on growth in the period 2008-2013. Differences in growth outcomes across countries arise not only due to the existence or non-existence of pre-crisis housing and debt bubbles but also due to the extent of fiscal policy intervention.

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