Testing the Bhaduri-Marglin Model with OECD Panel Data

The Bhaduri-Marglin model is a post-Kaleckian model that allows for studying the impact of functional income distribution on the growth in demand. Over recent years, a number of empirical studies based on this model have aimed at determining whether a redistribution towards profits harms or fosters demand growth. The focus so far has been on a very limited number of countries. This paper is the first to test the Bhaduri-Marglin model with panel data. It finds that demand growth is reduced by a redistribution towards profits in the average OECD country. Productivity growth is also impaired.