ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Income Distribution and Aggregate Demand in the Indian Economy

Does there exist a trade-off between labour income share and output growth rate? Or does a reduction in the wage share reduces the output growth rate? These questions remain central for analysing the impact of change in income distribution on the output growth rate. Since the dilution and suspension of labour laws involve exogenous changes in income distribution, the impact of such policies would depend on the relationship between income distribution and aggregate demand. This paper attempts to lay bare this relationship for the Indian economy through an empirical analysis of India’s macro data and a theoretical model based on the regression results.
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