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Egalitarian Policies, Effective Demand, and Globalization: Considering Budget Constraint



Author(s)

Taro Abe

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DOI:10.17265/2328-2134/2016.03.003

This paper examines the effectiveness of redistribution policies under budget constraint considering government spending for the productivity improvement and effective demand. It shows that an asset-based redistribution policy is not always effective under effective demand and budget constraint. However, the increase of effective demand because of an income-based redistribution improves employment, labor productivity, and wage rates because of increased government spending for productivity improvement as the results of saving rate from profit income show. A distinctive feature of this paper is considering effective demand with political aspects. Workers’ demands on unemployment compensation depend on the demand and supply condition in the goods market. The model implicitly assumes that labor is strong enough to affect political institutions and social security system is prepared enough to affect goods market. Therefore, the model built in this research is applicable to Europe in the real world.

egalitarianism, redistribution, effective demand, globalization