Egalitarian Policies and Effective Demand: Considering Balance of Payments (Note 1)

Abstract

This study examines the effectiveness of redistribution policies considering balance of payments. Unlike Bowles (2012) and Abe (2015, 2016), we assume that capital movement is sluggish to consider the short-run effects. Results indicate that conventional egalitarian policies such as increasing unemployment compensation and strengthening dismissal regulations can be effective, whereas an asset-based redistribution such as a decrease in the ratio of monitoring labor cannot be. These results contradict Bowles (2012). We need to reevaluate conventional egalitarian policies if the effects of effective demand and adjustment of capital continue in the long run.