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

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  • Nishi, Hiroshi

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.

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  • Nishi, Hiroshi, 2022. "Income distribution, technical change, and economic growth: A two-sector Kalecki–Kaldor approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 418-432.
    • Handle: RePEc:eee:streco:v:60:y:2022:i:c:p:418-432
    DOI: 10.1016/j.strueco.2021.12.003
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    Cited by:

    1. Lucrezia Fanti & Luca Zamparelli, 2021. "The paradox of thrift in a two‐sector Kaleckian growth model," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 526-538, July.

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    More about this item

    Keywords

    Two-sector model; Economic growth; Endogenous productivity growth; Technical change; Income distribution;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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