Income Distribution, Debt Accumulation, and Financial Fragility in a Kaleckian Model with Labor Supply Constraints

This paper investigates the effect of changes in the retention ratio, profit share, interest rate, and natural rate of growth on the rate of capital accumulation and the financial structure of firms by using a Kaleckian growth model with labor supply constraints. We show that if the economy exhibits a debt-burdened regime, depending on certain conditions, there could be cyclical fluctuations such that the financial structure of firms changes periodically from speculative finance to Ponzi finance.