A post-Keynesian model of growth and distribution with a constraint on investment

Pasquale Commendatore, Antonio Pinto and Iryna Sushko

Structural Change and Economic Dynamics, 2014, vol. 28, issue C, 12-24

Abstract: We introduce in a post-Keynesian/Kaleckian model of growth and distribution a constraint on firms’ investment induced by increasing adjustment costs and/or limited financial resources. Whereas in the short run limiting firms’ investment reduces capacity utilization and capital accumulation, in the long run, allowing the adjustment of the “normal” to the actual degree of capacity utilization, the direction of the impact of the constraint goes in the opposite direction: relaxing the constraint reduces capital utilization and accumulation. Moreover, an increase in the saving propensity or a fall in wages do not always cause a reduction in the degree of capital utilization – the so-called paradoxes of thrift and costs – as predicted by the standard post-Keynesian/Kaleckian analysis; and growth could be profit led. These results are not confined to long-run positions of the economy characterized by convergence to a stationary equilibrium but take also into account periodic or chaotic fluctuations.

Keywords: Post-Keynesian growth and distribution model; Constrained investment function; Stability; Complex dynamics (search for similar items in EconPapers)
JEL-codes: C62 E12 O41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:28:y:2014:i:c:p:12-24

DOI: 10.1016/j.strueco.2013.09.001

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