Thrift, stagnation and wealth distribution in a two class economy with applications to the United States

A two class (rentiers and workers) model of growth and distri- bution is applied to the study of long run stagnation in aggregate demand. The theoretical framework shows the same forces which lead to concentration of wealth and income amongst the class of rentiers, also constrain the aggregate economy's output capital ratio in the long run. We conjecture that this model addresses the secular stagnation argument that has gained prominence recently. For the period 1979- 2010, we nd the US economy represents the kind of stylized economy which would be prone to falling output capital ratios due to increased savings rate dierentials in its income and wealth ranking. A rst approximation suggests the long decline in the rate of saving in the US maybe a consequence of a distributional paradox of thrift.