This result is consistent with consumption externalities resulting from upward-looking comparisons. Moreover, an increase in the corporate financial balance or a decrease in the labour income share leads to an increase in the current account. This finding is consistent with the view that consumers do not fully ‘pierce the corporate veil’. Changes in personal and functional income distribution have contributed considerably to the widening of current account balances.
Income Distribution and the Current Account: A Sectoral Perspective
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