Conflict, growth, distribution, and employment: a long-run Kaleckian model

As is well known, the closure of the canonical Neo-Kaleckian model is an endogenous rate of capacity utilisation. To allay concerns of Harrodian instability one response has been to endogenise the normal rate to effective demand pressures. Recent contributions have stressed microfoundations for an adjustment in the normal rate towards the actual rate. The new approach focuses on shiftwork and redefines capacity utilisation as the average workweek of capital. This paper examines whether the new concept of capacity utilisation can provide a firmer basis for endogeneity in the normal rate. It argues that the assumption of variability in the normal shift system cannot be generalised across manufacturing industries, while the potential relevance for non-manufacturing industries is unknown. Another concern is that long-run trends in the average workweek of capital and aggregate demand do not coincide. The paper also finds that the long-run trend in the US Federal Reserve's index of capacity utilisation for the manufacturing sector is not flat as frequently claimed. Instead, there is a downward trend from the mid 1960s, which matches the slowdown in aggregate demand.

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Estimating normal rates of capacity utilisation and their tolerable ranges: a comment on Mark Setterfield

Cambridge Journal of Economics ◽

10.1093/cje/bez043 ◽

2019 ◽

Cited By ~ 1

Author(s):

Florian Botte

Keyword(s):

Normal Rate ◽

Tolerance Range ◽

Capacity Utilisation ◽

Long Run ◽

Starting Point ◽

Utilisation Rate ◽

Alternative Solutions ◽

Improved Methods ◽

Behavioural Theories ◽

Kaleckian Model

Abstract Taking the potential instability of the Kaleckian model of growth as his starting point, M. Setterfield (‘Long-run variation in capacity utilisation in the presence of a fixed normal rate’, Cambridge Journal of Economics, 2018, doi:10.1093/cje/bey016) investigates, inter alia, the possibility of taming Harrodian instability. His investigation uses a range of tolerable values, rather than a unique value, for the normal rate of capacity utilisation. After illustrating his point theoretically, Setterfield then proposes empirical methods to estimate the normal capacity utilisation rate and the corresponding tolerance range. This paper suggests improved methods to estimate the normal rate of capacity utilisation and its tolerance range. The proposed alternative solutions offer better consistency with post-Keynesian behavioural theories, and the presented exploratory narrative based on these suggestions can partly explain the current stagnation.

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Convergence in a neo-Kaleckian model with endogenous technical progress and autonomous demand growth

Review of Keynesian Economics ◽

10.4337/roke.2019.03.01 ◽

2019 ◽

Vol 7 (3) ◽

pp. 275-291 ◽

Cited By ~ 6

Author(s):

Won Jun Nah ◽

Marc Lavoie

Keyword(s):

Technical Progress ◽

Capacity Utilization ◽

Interactive Effects ◽

Demand Growth ◽

Adjustment Mechanism ◽

Keynesian Model ◽

Long Run ◽

Short Run ◽

Endogenous Technical Progress ◽

Kaleckian Model

This paper introduces technical progress along the lines of the Kaldor–Verdoorn law within a neo-Kaleckian model of growth and distribution that incorporates the Sraffian supermultiplier mechanism. The key features of the model include the interactive effects of endogenous technical progress, the non-capacity-creating demand component that grows at an exogenous rate and, in its long-run version, a Harrodian adjustment mechanism. It turns out that, whereas the model converges towards the normal rate of capacity utilization, the main tenets of the Keynesian model are still valid in the long run as well as in the short run in the sense that all of the average rates of accumulation, capacity utilization, and technical progress are lower during the traverse after the propensity to save or the share of profits goes up. The conditions under which the productivity regime can be wage-led are examined, and the possible effects of an exogenous technical shift are also discussed.

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