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Demand-led growth with endogenous innovation

Mauro Caminati () and Serena Sordi ()

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: This paper contributes to the recent macro-dynamics literature on demand-led growth, that borrows insights from the idea expressed long ago by J. Hicks (1950) that Harrodian instability may be tamed by a source of autonomous expenditure in the economy. Contrary to the other contributions in this literature, autonomous expenditure is not exogenous, but is driven by a flow of profit-seeking R&D and innovation expenditures, that raise labour productivity through time. If the state of distribution, hence the wage share, is exogenously fixed and constant, the model gives rise to a macro-dynamics in a two dimensional state space, that may converge to, or give rise to limit cycles around, an endogenous growth path. An exogenous rise of the profit share exerts negative e¤ects on long-run growth and employment, showing that growth is wage led.

Keywords: wage-led growth; endogenous autonomous expenditure; labour-saving technological progress: limit cycles (search for similar items in EconPapers)
JEL-codes: E11 E12 O41 (search for similar items in EconPapers)
Date: 2017-11
New Economics Papers: this item is included in nep-gro, nep-ino, nep-mac and nep-pke
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Journal Article: Demand‐led growth with endogenous innovation (2019) Downloads
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