Technological unemployment and income inequality

Abstract

The paper presents a stock-flow consistent agent-based model with effective demand, endogenous credit creation, and labor-saving technological progress. The aim is to study the joint dynamics of both personal and functional distribution of income as a result of technological unemployment, together with the effect on household debt. Numerical simulations show the potentially destabilizing effect of technological unemployment and reveal that an increase in the profit share of income amplifies the negative effect of income inequality on the business cycle and growth. The sensitivity analysis provides indications on the effectiveness of possible mixes of fiscal and redistributive policies, but also demonstrates that the effectiveness of policy measures is strongly dependent on behavioral and institutional factors. Show more