Growth and Income Distribution with Managers and Financiers: Issues and Heterodox Models

While a great deal of attention has been given to the interaction between income distribution and economic growth using heterodox macroeconomic models, most of this analysis has used twoclass models of distribution with workers and capitalists which conflate concepts of personal and functional distribution. Recent discussions of increases in inequality have drawn attention to changes in income distribution due to wage inequality, rather than only to changes in the functional share of labor. This has led to the development of some models with more than three classes, introducing different kinds of labor to analyze income distributional changes. This paper examines some issues concerning different concepts of inequality and distribution, including functional, vertical and horizontal ones. It then uses a simple two-group framework to analyze the determinants and growth implications of income distributional changes involving vertical inequality to develop simple models following classical-Marxian and post-Keynesian-Kaleckian approaches.