Wealth accumulation and aggregate demand stagnation in a two class economy with applications to the United States (original) (raw)
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Inequality of income is one of the significant factors forming social capital. Two views dominate among economists dealing with the influence of income inequality on economic growth. On the one hand, a too low level of income inequality does not motivate people to increase their labour productivity. Low inequality of income might result from an extended social care system and a GDP burdened with social transfers. A good example may be a situation when an unemployed person refuses to accept a job offer and prefers unemployment benefits to a slightly higher salary. Moreover, a lack of incentives for an employee who fails to acknowledge the economic sense of increasing the productivity of his or her work might lead to a slower growth of the economy. On the other hand, a contrary view suggests that an increase in inequality of income has a negative impact on the economy. The accumulation of wealth by a small number of citizens raises doubts about the good use of that wealth for the inve...