The Influence of Income Distribution to Economic Growth:Post Keynesian and Chinese Experience
|School||Tianjin University of Finance and Economics|
|Keywords||Economic growth Income distribution Thirlwall’s Law|
The sustained and rapid economic growth and the continually expanding income gap are two remarkable features in China’s economy. The expanding income gap contributes to the domestic situation of low resident consumption, high saving, high investment, extremely insufficient domestic demand, which directly leads to the dependency on investment and foreign trade. Hence, the analysis of economic growth in the sight of income distribution is of great theoretical and realistic significance.The early Post-Keynesian Economics researches economic growth from the distribution of the national wealth in labor and capital while the Thirlwall’s Law discusses it in the perspective of trade, arguing what influence economic growth are the growth rate of export and the domestic income elasticity of import demand. This paper firstly makes an introduction of Post-Keynesian Economics theory and analyzes the Chinese current situation in which income distribution make an effect to economic growth. After that it makes an empirical study of the influence of income distribution and foreign trade to economic growth on the basis of cointegration theory and VEC model. The results present the negative correlation of economic growth and labor quantity in which the rapid economic growth are acquainted to the low labor share and high investment. Thirlwall’s Law are proved in China that the current and previous domestic income elasticity of import demand have weak inhibition to the economy.This paper argues the influences of income distribution to economic growth in the perspective of Post-Keynesian Economics theory and first makes the empirical study to China on the basis of Thirlwall’s Law, reaching to the conclusion that the stable and healthy economic development can be attained by the adjustment of labor share and foreign trade. Meanwhile, the Chinese optimum growth speed and how to adjust the labor share and the reformation of income distribution need the deeper study.