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The Role of Aggregate Demand and Resource Distribution Policies in the Elusive Search for High Economic Growth Rates

Author

Listed:
  • Luis Arce

    (Ministerio de Economía y Finanzas Públicas)

  • David Quiroz

    (Ministerio de Economía y Finanzas Públicas)

  • José Villegas

    (Ministerio de Economía y Finanzas Públicas)

Abstract

Can aggregate demand policies bring about economic growth in the long term? What is the impact of a better resource distribution on long-term economic growth in Bolivia? These questions are analyzed within the framework of a Kaleckian model of economic growth to make an empirical study of the relationships between the aggregate demand, distribution and growth. For estimating the structural behavior equations of the prevailing regimes in the Bolivian economy, Bayesian methods were used. The conclusions are that the Bolivian economy displays a wage-led demand regime and an overall contractive regime in the profit share (i.e. when the benefits in the profit share increase, economic growth goes down), and therefore a better resource distribution. When the aggregate demand increases, long-term economic growth will be greater. The results show that a decrease of 1% in the profit share, which increases the annual wage of the workers by approximately BOB 268.4, will lead to an annual aggregate output increase of 0,57%.

Suggested Citation

  • Luis Arce & David Quiroz & José Villegas, 2016. "The Role of Aggregate Demand and Resource Distribution Policies in the Elusive Search for High Economic Growth Rates," Cuadernos de Investigación Económica Boliviana, Ministerio de Economía y Finanzas Públicas de Bolivia, vol. 1(2), pages 1-34, July.
    • Handle: RePEc:efp:journl:v:1:y:2015:i:2:p:1-34
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    More about this item

    Keywords

    Growth; Distribution; Demand-Driven Accumulation Regime; Productivity Regime; Endogenous Technological Change; Bayesian Analysis;
    All these keywords.

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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