A Kaleckian growth model of secular stagnation with induced innovation

Marco Stamegna

MPRA Paper from University Library of Munich, Germany

Abstract: The present paper works out a demand-led growth model of a labour-constrained economy with an endogenous direction of technical change. It draws on the Kaleckian-Steindlian tradition to examine the short-run relation between income distribution, capacity utilization, and capital accumulation; on Goodwin-type growth cycle models to investigate the dynamic interaction between labour market and distributive conflict; on the induced innovation literature to link labour productivity growth to income distribution. The model defines a two-dimensional system of differential equations in the wage share and the employment rate at full capacity to investigate the properties of the long-run equilibrium. In a Kaleckian fashion, an endogenous rate of capacity utilization allows effective demand and income distribution to affect the long-run equilibrium. We find that: i) an exogenous increase in workers’ bargaining power raises the long-run labour share, capital accumulation, labour productivity growth, and real wage growth, regardless of the short-run demand and growth regime of the economy; ii) a positive institutional shock to the labour share may cause the long-run employment rate to fall even in a wage-led demand regime; conversely, iii) positive technology shocks reduce the long-run rate of growth of the economy in a wage-led growth regime; thus, strengthening labour market regulation emerges as an unambiguously better strategy to raise the long-run labour share, capital accumulation, and labour productivity growth.

Keywords: Functional income distribution; effective demand; growth regimes; endogenous technical change (search for similar items in EconPapers)
JEL-codes: E12 E24 E25 O40 (search for similar items in EconPapers)
Date: 2022-07-12
New Economics Papers: this item is included in nep-gro, nep-hme, nep-knm and nep-pke
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