Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component

Olivier Allain ()

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Abstract: This article presents a basic Kaleckian model, enriched by the simultaneous addition of an Harrodian investment function and an autonomous expenditure component that grows at an exogenous rate. The model shows that the usual short-run properties (wage-led growth) are only transient, since the long-run growth rate converges towards that of autonomous expenditures. However, the impact on the level of variables (output, capital stock, labour, etc.) is permanent. The model also provides a conditional solution to the ‘second' Harrod knife-edge problem: the destabilising behaviour of firms (as they adjust their investment decisions to the discrepancy between the actual and the normal rates of capacity utilisation) is now required to achieve the normal rate of capacity utilisation.

Keywords: Kaleckian models; Harrod instability; Income distribution; Public expenditure; Automatic stabilizers (search for similar items in EconPapers)
Date: 2015-09-15
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Citations: View citations in EconPapers (85)

Published in Cambridge Journal of Economics, 2015, 39 (5), ⟨10.1093/cje/beu039⟩

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Related works:
Journal Article: Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component (2015)
Working Paper: Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01298599

DOI: 10.1093/cje/beu039

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