The Aggregate Demand, Aggregate Supply, and Endogenous Growth: A Synthetic neo-Kaleckian Model

Thomas Palley

No 7-2010, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This paper develops a neo-Kaleckian endogenous growth model that incorporates aggregate supply - demand balance and balance between labor force and employment growth. The paper explicitly models income distribution which is a critical channel whereby unemployment affects investment and growth. The model generates a growth unemployment rate trade-off. A reduced propensity to save raises growth but it also raises the unemployment rate because of induced technological progress. This resonates with Alvin Hansen's hypothesis. The paper contains several theoretical innovations including a new mechanism whereby unemployment affects income distribution; introduction of a Phillips curve and inflation effects; and introduction of demand growth expectation effects.

Keywords: aggregate demand; supply; unemployment; neo-Kaleckian endogenous growth theory (search for similar items in EconPapers)
JEL-codes: E12 O33 O41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010
New Economics Papers: this item is included in nep-fdg, nep-lab, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:7-2010

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