A two‐sector neo‐Kaleckian model of growth and distribution: Investment allocation and evolutionary dynamics

Ricardo Araujo and Carlos Iwai Drumond

Metroeconomica, 2021, vol. 72, issue 1, 213-236

Abstract: This paper focuses on the two‐sector neo‐Kaleckian model of growth and distribution that was developed by Dutt (1990) and challenged by Park (1995). We develop a variant of this model, focusing on the supply‐side to solve the overdetermination problem that was raised by Park. Finally, we introduce evolutionary dynamics to model the investment flows between the capital and consumer goods sectors. In this setup, the sectoral profit rates and the size of capital stocks wield an essential role upon the entrepreneur’s decision on which sector to invest in. This model is perfectly determined and it generates a stable evolutionary equilibrium over the long term.

Date: 2021
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