Worker Household Debt, Functional Income Distribution and Growth: a neo-Kaleckian Perspective

In a stock-flow consistent neo-Kaleckian macro-model, along with worker households' debt dynamics, in the long-run, we incorporate distributional dynamics and demonstrate the possibility of multiple equilibria. Dynamic stability of the economy is also examined. Both debt-led and debt-burdened demand and growth regimes are possible in short-run as well as in the long-run. We find that mergers, acquisitions and hostile takeovers play a crucial role for (de)stabilizing the economy. In some instances, the speed of the adjustment parameter of the distributional dynamics becomes crucial for stabilizing the economy. Otherwise, the economy may lose its stability and gives birth to limit cycles.