The Kaleckian Model

The Kaleckian model is an economic framework that analyzes how income distribution between workers and capital owners impacts overall demand, investment, and growth. It emphasizes that the proportion of income paid to labor versus capital influences consumption patterns—since workers tend to spend more of their income, higher wages can boost demand. Conversely, when profits for capital are high, investment may increase, but overall demand might diminish if wages are low. The model helps explain economic fluctuations, income inequality, and the role of profit margins in shaping long-term economic stability.