INCOME DISTRIBUTION AND THE TRADE CYCLE IN THE ‘YEARS OF HIGH THEORY’

There is a short period, at the eve of the Second World War, where the development of macroeconomic theory pushed imperfect competition to the fore. During this period called by Shackle the ‘years of high theory’, many issues concerning income distribution and the trade cycle were raised. The analysis of this question of the relationship between imperfect competition and income distribution will be our point of departure. In a first section, we review how product imperfections were integrated to the analysis of income distribution. Then, the role played by income distribution effects in the trade cycle theories developed during the thirties are examined in a second section, the first part focusing on Kalecki 1939’s theory based on a linear saving function while the second part is devoted to Kaldor’s 1940 model analysis based on a non-linear saving function.