Effective demand and income distribution in the context of agriculture-industry demand linkage: A two-sector macroeconomic framework

This paper extends recent works on the relationship between the distribution of income and growth in demand-constrained industrial economies in a two-sector framework incorporating the industry-agriculture demand linkages typical of many LDCs. It argues that the issue of income distribution between the capitalists and the workers becomes also an issue of income distribution between the industrial capitalists and the landlords. A change in income distribution in favor of the workers, the class of non-savers, will benefit the landlords class, which sells food to the workers. The redistribution toward wages can potentially be contractionary if the landlords have a sufficiently high saving rate.