IDEAS home Printed from https://ideas.repec.org/a/elg/rokejn/v1y2013i1p79-104.html
   My bibliography  Save this article

Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy

Author

Listed:
  • Thomas I. Palley

    (Independent Analyst, Washington)

Abstract

This paper compares Cambridge and neo-Kaleckian growth theory. Both are members of the post-Keynesian approach to growth and distribution, but the Cambridge model is a hybrid of Keynesian and classical features whereas the neo-Kaleckian model is Keynesian. The Cambridge approach assumes full capacity utilization, while the neo-Kaleckian approach assumes variable capacity utilization. The two theories rely on fundamentally different theories of income distribution. The Cambridge model has a class structure of saving that generates Pasinetti's (1962) theorem regarding irrelevance of worker saving for steady-state growth and distribution. That class structure can be included in the neo-Kaleckian model, generating a variant of the Pasinetti result whereby steady-state capacity utilization is independent of worker saving. Fiscal policy has similar growth effects in the two models, albeit via very different mechanisms. Both models suffer from lack of attention to the labor market.

Suggested Citation

  • Thomas I. Palley, 2013. "Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 79-104, January.
    • Handle: RePEc:elg:rokejn:v:1:y:2013:i:1:p79-104
    as

    Download full text from publisher

    File URL: http://www.elgaronline.com/view/journals/roke/1-1/roke.2013.01.05.xml
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    2. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
    3. Lavoie, Marc, 1995. "The Kaleckian Model of Growth and Distribution and Its Neo-Ricardian and Neo-Marxian Critiques," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 19(6), pages 789-818, December.
    4. Palley, Thomas I, 2001. "The Stock Market and Investment: Another Look at the Micro-foundations of q Theory," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(5), pages 657-667, September.
    5. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 267-279.
    6. Dalziel, Paul C, 1991. "A Generalisation and Simplification of the Cambridge Theorem with Budget Deficits," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 15(3), pages 287-300, September.
    7. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    8. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    9. Stockhammer, Engelbert, 2011. "Wage-led growth: An introduction," Economics Discussion Papers 2011-1, School of Economics, Kingston University London.
    10. Tobin, James, 1982. "Money and Finance in the Macroeconomic Process," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(2), pages 171-204, May.
    11. Amitava Krishna Dutt, 2006. "Aggregate Demand, Aggregate Supply and Economic Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 319-336.
    12. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 8(1), pages 25-40, March.
    13. James R. Crotty, 1990. "Owner–Manager Conflict and Financial Theories of Investment Instability: A Critical Assessment of Keynes, Tobin, and Minsky," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 12(4), pages 519-542, July.
    14. You, Jong-Il & Dutt, Amitava Krishna, 1996. "Government Debt, Income Distribution and Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(3), pages 335-351, May.
    15. Palley, Thomas I, 1996. "Inside Debt, Aggregate Demand, and the Cambridge Theory of Distribution," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(4), pages 465-474, July.
    16. Palley, Thomas I, 1997. "Money, Fiscal Policy and the Cambridge Theorem," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(5), pages 633-639, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    2. Pintu Parui, 2024. "Fiscal expansion, government debt and economic growth: a post-Keynesian perspective," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 47(1), pages 117-154, January.
    3. Eckhard Hein, 2018. "Autonomous government expenditure growth, deficits, debt, and distribution in a neo-Kaleckian growth model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(2), pages 316-338, April.
    4. Greg Hannsgen, 2014. "Fiscal Policy, Chartal Money, Mark-up Dynamics and Unemployment Insurance in a Model of Growth and Distribution," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 487-523, July.
    5. Valeria Cirillo & Marcella Corsi & Carlo D’Ippoliti & Lucio Gobbi, 2024. "Asymmetric effects of macro policies on women’s and men’s incomes. An empirical investigation of the eurozone crisis in a gender perspective," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 327-359, July.
    6. Valeria Cirillo & Marcella Corsi & Carlo D'Ippoliti, 2015. "Gender, class and the crisis," Working Papers CEB 15-026, ULB -- Universite Libre de Bruxelles.
    7. Köhler, Kasper, 2018. "The limits to profit-wage redistribution: Endogenous regime shifts in Kaleckian models of growth and distribution," IPE Working Papers 112/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roberto Veneziani & Luca Zamparelli & Amitava Krishna Dutt, 2017. "Heterodox Theories Of Economic Growth And Income Distribution: A Partial Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1240-1271, December.
    2. Thomas I. Palley, 2013. "Enriching the Neo-Kaleckian Growth Model: Nonlinearities, Political Economy, and Financial Factors," Working Papers wp335, Political Economy Research Institute, University of Massachusetts at Amherst.
    3. Thomas I. Palley, 2009. "Inside Debt and Economic Growth: A Cambridge - Kaleckian Analysis," IMK Working Paper 02-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Javier López Bernardo & Engelbert Stockhammer & Félix López Martínez, 2016. "A post Keynesian theory for Tobin’s in a stock-flow consistent framework," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(2), pages 256-285, April.
    5. Greg Hannsgen, 2014. "Fiscal Policy, Chartal Money, Mark-up Dynamics and Unemployment Insurance in a Model of Growth and Distribution," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 487-523, July.
    6. Eric Kemp‐Benedict, 2020. "Convergence of actual, warranted, and natural growth rates in a Kaleckian–Harrodian‐classical model," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 851-881, November.
    7. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 339-364, July.
    8. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
    9. Stamegna, Marco, 2022. "A Kaleckian growth model of secular stagnation with induced innovation," MPRA Paper 113794, University Library of Munich, Germany.
    10. Eckhard Hein, 2020. "Gender Issues in Kaleckian Distribution and Growth Models: On the Macroeconomics of the Gender Wage Gap," Review of Political Economy, Taylor & Francis Journals, vol. 32(4), pages 640-664, October.
    11. Eckhard Hein, 2019. "Harrodian instability in Kaleckian models and Steindlian solutions," FMM Working Paper 46-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    12. Alejandro Rodríguez Arana, 2015. "The share of wages in national income and its effects in the short and long run economic activity and growth," Working Papers 0215, Universidad Iberoamericana, Department of Economics.
    13. Emanuele Russo, 2021. "Harrodian instability in decentralized economies: an agent-based approach," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 539-567, July.
    14. Stefan Ederer & Miriam Rehm, 2021. "Wealth inequality and aggregate demand," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 405-424, May.
    15. Roberto Veneziani & Luca Zamparelli & Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.
    16. Schoder, Christian, 2014. "Instability, stationary utilization and effective demand: A structuralist model of endogenous cycles," Structural Change and Economic Dynamics, Elsevier, vol. 30(C), pages 10-29.
    17. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    18. Greg Hannsgen, 2012. "Fiscal Policy, Unemployment Insurance, and Financial Crises in a Model of Growth and Distribution," Economics Working Paper Archive wp_723, Levy Economics Institute.
    19. Thomas I. Palley, 2010. "Inside Debt and Economic Growth: A Neo-Kaleckian Analysis," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 14, Edward Elgar Publishing.
    20. Gilberto Tadeu Lima, 2000. "Market concentration and technological innovation in a dynamic model of growth and distribution," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 447-475.

    More about this item

    Keywords

    Distribution; growth; Cambridge; neo-Kaleckian; ownership; fiscal policy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:elg:rokejn:v:1:y:2013:i:1:p79-104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Phillip Thompson (email available below). General contact details of provider: http://www.elgaronline.com/roke .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.