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Income inequality, economic activity and economic policy instruments: a post-Keynesian approach

Grant number: 18/21762-0
Support type:Scholarships in Brazil - Doctorate
Effective date (Start): May 01, 2019
Status:Discontinued
Field of knowledge:Applied Social Sciences - Economics - Economic Theory
Principal researcher:Carolina Troncoso Baltar
Grantee:Lílian Nogueira Rolim
Home Institution: Instituto de Economia (IE). Universidade Estadual de Campinas (UNICAMP). Campinas , SP, Brazil
Associated scholarship(s):19/22413-1 - Economic policies, income distribution and economic activity: an agent-based open economy model, BE.EP.DR

Abstract

The aim of the thesis is to develop an agent-based model that includes heterogeneous agents and treats income distribution as an endogenous variable, besides considering important aspects of the Brazilian economy that may explain the income distribution dynamics in the country (through the relation between the interest rate, exchange rate, inflation rate and income transfer instruments). Based on the identified gaps in the post-Keynesian literature in terms of the treatment of the income distribution dynamics and its effect on the economic activity, the thesis aims to investigate whether the treatment of the income distribution as an endogenous variable allows for the analysis of the interaction between economic policy instruments (minimum wage, unemployment benefits, taxation and monetary policy) and macroeconomic variables that have a redistributive impact, suggesting certain nuances in the income distribution dynamics and its relation with economic activity. The hypothesis is that, on the one hand, a strong pass-through effect from the exchange rate to prices attenuates the income concentration effect of increases in the interest rate (given the domestic currency appreciation that follows, which has a negative effect on the mark-up applied to prices and on inflation) and, on the other hand, income redistribution instruments under the government control may also act to redistribute income. However, these variables and instruments may affect differently the different groups, so the magnitude of the effect of each instrument on economic activity would be subject to the social structure of the economy. The understanding of the redistributive effect of the selected variables and of their interaction during and with the economic cycle may help the design of more effective public policies that combine economic growth with income distribution. By considering important aspects of the Brazilian economy, the study aims to highlight mechanisms that may operate in this economy and, thus, support analyses regarding economic policy instruments that alter the income distribution and its effect on economic activity in this country. (AU)

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