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Tackling the instability of growth: A Kaleckian model with autonomous demand expenditures

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  • Olivier Allain

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UPD5 - Université Paris Descartes - Paris 5)

Abstract
This article presents a Kaleckian model enriched by introducing autonomous public expenditure which grows at an exogenous rate. It shows that the usual properties are not affected in the short run: growth is wage-led. But long run properties are strongly affected: public expenditure plays a role as an automatic stabilizer so that the accumulation rate converges on the growth rate of public expenditure. The effect of a change in income distribution on the growth rate is then only transient. However, the impacts on the level of variables (output, capital stock, labor, etc.) remain permanent. The research here also shows that this theoretical framework can provide a solution (depending on the parameters) to the 'second' Harrod knife-edge problem. In this case, Kaleckian outcomes are consistent with the convergence of the current utilization rate on the 'normal' rate, a result which has not been found in the existing literature.

Suggested Citation

  • Olivier Allain, 2013. "Tackling the instability of growth: A Kaleckian model with autonomous demand expenditures," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00821080, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00821080
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00821080
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    Keywords

    automatic stabilizers; income distribution; Kaleckian models; utilization rate; Harrod instability; taux d'utilisation; Modèles kaleckiens; instabilité harrodienne; répartition du revenu; stabilisateurs automatiques;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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