POST-KEYNESIAN EFFECTIVE DEMAND AND CAPITAL-LABOUR SUBSTITUTION

Takashi Ohno

Metroeconomica, 2009, vol. 60, issue 3, pages 525-536

Abstract: This paper analyses the relationship between the real wage rate and employment when we induce capital-labour substitution within a Post-Keynesian Kaleckian model. To avoid the over-determinacy problem, we consider a non-homogeneous production function and cost minimization, in contrast to recent work that assumed a homogeneous production function and profit maximization. As a result, we find not only that increasing returns to scale are important in sustaining the long-run stability condition, but also that if the increasing returns to scale are small, then it is more likely that employment will increase. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd.

Date: 2009

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