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Employment and fiscal policy in a Marxian model

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  • Stephen Thompson

Abstract

This article presents a simple formalization of Marx's circuit of capital framework, but with some modern additions: a public sector, an investment function that shifts over time in reaction to disequilibria, and a ‘wage curve’ linking income distribution to the size of the reserve army of labor. The dynamics can gravitate toward either a low‐employment trajectory in which public spending has expansionary long‐run effects, or a high‐employment trajectory characterized by a profit squeeze. The stability of the different trajectories depends on the investment function.

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  • Stephen Thompson, 2018. "Employment and fiscal policy in a Marxian model," Metroeconomica, Wiley Blackwell, vol. 69(4), pages 820-846, November.
    • Handle: RePEc:bla:metroe:v:69:y:2018:i:4:p:820-846
    DOI: 10.1111/meca.12214
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