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Demand Drives Growth All The Way

Lance Taylor (), Duncan Foley (), Armon Rezai, Luiza Pires, Ozlem Omer () and Ellis Scharfenaker

No 2016-04, SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. from Schwartz Center for Economic Policy Analysis (SCEPA), The New School

Abstract: This paper makes three contributions to the existing literature on economic growth: first, we provide a demand-driven alternative to the conventional supply side Solow-Swan growth model. The model’s medium run is built around MarxGoodwin cycles of demand and distribution. Second, we introduce wage income of “capitalist” households. The Samuelson-Modigliani steady state “dual” to Pasinetti’s cannot be stable when capitalists have positive wages. Finally, we speak to the discussion triggered by Piketty on the stability of wealth concentration and its relation to the profitability of capital. Our demand-driven model of the long run satisfies Kaldor’s stylized facts (the gold standard of growth theory) and generates sustained economic growth with the capitalists’ share of wealth stabilizing between zero and one. Complications arising from “excess” capital gains and how well the model fits the data are briefly considered.

Keywords: Demand; Growth; Keynes (search for similar items in EconPapers)
JEL-codes: B51 E12 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-04
New Economics Papers: this item is included in nep-gro, nep-his, nep-hme, nep-hpe, nep-mac and nep-pke
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Related works:
Working Paper: Demand Drives Growth all the Way (2018) Downloads
Working Paper: Demand Drives Growth all the Way (2017) Downloads
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