Demand drives growth all the way: Goodwin, Kaldor, Pasinetti and the Steady State

Lance Taylor, Duncan Foley and Armon Rezai

Cambridge Journal of Economics, 2019, vol. 43, issue 5, 1333-1352

Abstract: A demand-driven alternative to the conventional Solow–Swan growth model is analysed. Its medium run is built around Marx–Goodwin cycles of demand and distribution. Long-run income and wealth distributions follow rules of accumulation stated by Pasinetti in combination with a technical progress function for labour productivity growth incorporating a Kaldor effect and induced innovation. An explicit steady state solution is presented along with analysis of dynamics. When wage income of capitalist households is introduced, the Samuelson–Modigliani steady state ‘dual’ to Pasinetti’s cannot be stable. Numerical simulation loosely based on US data suggests that the long-run growth rate is around 2% per year and that the capitalist share of wealth may rise from about 40 to 70% due to positive medium-term feedback of higher wealth inequality into its own growth.

Keywords: Wealth distribution; Income distribution; Heterodox economic growth; Cambridge theory (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (15)

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