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Income distribution, technical change, and economic growth: A two-sector Kalecki--Kaldor approach

Hiroshi Nishi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a two-sector Kalecki--Kaldor model of income distribution, technical change, and economic growth. The model is Kaleckian in the sense that it incorporates mark-up pricing, investment independent of saving, and excess capacity. It is also Kaldorian in that labour productivity growth is led by Kaldor's technical progress function. In other words, productivity growth is endogenously realised through the technology embodied in new capital stock, which differentiates our model from previous two-sector models. Our extension drastically changes the standard Kaleckian implications. We find that although the economic activity levels in the short run are led by the demand and income distribution parameters, economic growth in the long run is realised by supply-side (i.e. technical change and the associated productivity and wage growth) parameters. The important implication of our findings is that a two-sector economy faces a trade-off between a high economic growth rate and the local stability of the steady state.

Keywords: Two-sector model; Economic growth; Endogenous productivity growth; Technical change; Income distribution (search for similar items in EconPapers)
JEL-codes: D33 E12 O41 (search for similar items in EconPapers)
Date: 2020-07-02
New Economics Papers: this item is included in nep-gro, nep-mac and nep-pke
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