The Role of Aggregate Demand and Resource Distribution Policies in the Elusive Search for High Economic Growth Rates

Luis Arce, David Quiroz () and Jose Villegas ()
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Luis Arce: Ministerio de Economía y Finanzas Públicas
David Quiroz: Ministerio de Economía y Finanzas Públicas

Cuadernos de Investigación Económica Boliviana, 2016, vol. 1, issue 2, 1-34

Abstract: Can aggregate demand policies bring about economic growth in the long term? What is the impact of a better resource distribution on long-term economic growth in Bolivia? These questions are analyzed within the framework of a Kaleckian model of economic growth to make an empirical study of the relationships between the aggregate demand, distribution and growth. For estimating the structural behavior equations of the prevailing regimes in the Bolivian economy, Bayesian methods were used. The conclusions are that the Bolivian economy displays a wage-led demand regime and an overall contractive regime in the profit share (i.e. when the benefits in the profit share increase, economic growth goes down), and therefore a better resource distribution. When the aggregate demand increases, long-term economic growth will be greater. The results show that a decrease of 1% in the profit share, which increases the annual wage of the workers by approximately BOB 268.4, will lead to an annual aggregate output increase of 0,57%.

Keywords: Growth; Distribution; Demand-Driven Accumulation Regime; Productivity Regime; Endogenous Technological Change; Bayesian Analysis (search for similar items in EconPapers)
JEL-codes: C11 E11 E22 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:efp:journl:v:1:y:2015:i:2:p:1-34

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