Mark-up pricing, sectoral dynamics, and the traverse process in a two-sector Kaleckian economy*

Shinya Fujita

Cambridge Journal of Economics, 2019, vol. 43, issue 2, 465-479

Abstract: Kaleckian models, which study the relation between functional income distribution and demand formation, have focused on how macro-level distribution affects macro-level performance. In real economies, however, labour–management negotiations are held at the industry level and thus the relation between sectoral distribution and sectoral/macroeconomic performance should be considered. This study presents a two-sector Kaleckian model with intermediate inputs and investigates how a distributive change in one sector affects sectoral/macroeconomic capacity utilization and capital accumulation. The results of the presented comparative static analysis and traverse analysis demonstrate that one sector’s change in the mark-up rate shifts each sector’s rate of capacity utilization in the opposite direction, while the impact of one sector’s change in the mark-up rate on performance differs by sector. The analyses also demonstrate that the effect of a change in the mark-up rate on capital accumulation depends on the firm’s animal spirits.

Keywords: Two-sector model; Mark-up pricing; Traverse analysis (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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