Social common capital accumulation and fiscal sustainability in a wage-led growth economy

Hiroshi Nishi and Kazuhiro Okuma

No PKWP2305, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: We build a three-dimensional Kaleckian dynamic model, incorporating government-provided social common capital’s long-run stock effects and subsequent debt accumulation. We investigate how fiscal stance changes and demand and distributional impacts in a wage-led growth regime affect social common capital accumulation, economic growth, and stability. The Keynesian stability and Domar conditions are necessary for a long-run economically meaningful steady state, while a proactive fiscal stance promotes higher economic growth and a more sustainable economy. A higher wage share stabilises the economy by increasing the likelihood of satisfying the Domar condition, realising an equitable workers/capitalists income distribution, and establishing a resilient economy.

Keywords: Social common capital; fiscal sustainability; government debt; wage-led growth; Kaleckian model (search for similar items in EconPapers)
JEL-codes: E11 E12 E25 H54 O40 (search for similar items in EconPapers)
Pages: 26
Date: 2023-04
New Economics Papers: this item is included in nep-gro, nep-mac and nep-pke
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