Distribution and Growth with an Infrastructure Constraint

J Mohan Rao

Cambridge Journal of Economics, 1993, vol. 17, issue 4, 369-89

Abstract: This paper develops a two-sector Kaleckian model with growth constrained by agricultural (infrastructure) supply and industrial investment demand. The agricultural price is demand-determined while the industrial price is set as a markup on costs. The distribution of investable surplus between the private and government sectors is a key influence on growth and distribution. Insufficient public savings limits infrastructure supply, which helps keep agricultural rents high. Changes in industrial markup or tax rates cannot satisfy conflicting demands of renters, wage stability, and growth. If fiscal or agrarian reforms become feasible, simultaneous increases in employment, real wages, and growth become attainable. (c) 1993 Academic Press, Inc. Copyright 1993 by Oxford University Press.

Date: 1993
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