Stagnant growth and income inequality linked in groundbreaking economic model
The article explores why growth is slowing down and income inequality is increasing in many advanced economies. By creating a new model that focuses on different income groups and their spending habits, the researchers found that demand plays a crucial role in economic growth. They discovered that even though potential growth is driven by the supply side, limitations in consumer demand can hold back income growth. This hybrid model combines neoclassical and Keynesian ideas to show how economic growth is affected by both supply and demand factors.