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Keynes's multiplier in a two-sectoral framework

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  • Jochen Hartwig

Abstract

This paper endeavours to reinterpret one of the most fundamental concepts of macroeconomics: the Keynesian investment multiplier. The multiplier is not interpreted as a dynamic process (or quantity reaction of output) nor as a logical relation (or ratio) between income and investment expenditure, but as an equilibrium condition that prescribes the proportionality between the two 'departments' of the economy (the consumption-goods and the investment-goods sector) necessary for 'completely successful reproduction'. The Marxian concept of reproduction schemes is combined with Keynes's 'fundamental psychological law' (which states that the marginal propensity to consume is positive and less than unity) to derive this result. This 'structural' view of the multiplier is then used to analyse questions relating to economic growth, capital accumulation and structural change.

Suggested Citation

  • Jochen Hartwig, 2004. "Keynes's multiplier in a two-sectoral framework," Review of Political Economy, Taylor & Francis Journals, vol. 16(3), pages 309-334.
    • Handle: RePEc:taf:revpoe:v:16:y:2004:i:3:p:309-334
    DOI: 10.1080/0953825042000225616
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    References listed on IDEAS

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    1. Claude Gnos & Louis-Philippe Rochon, 2008. "The Keynesian Multiplier," Post-Print halshs-00314304, HAL.
    2. Pasinetti,Luigi, 1993. "Structural Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521432825, September.
    3. Johan Deprez, 1997. "Open-Economy Expectations, Decisions, and Equilibria: Applying Keynes’ Aggregate Supply and Demand Model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(4), pages 599-615, July.
    4. L. Randall Wray, 1999. "Theories of Value and the Monetary Theory of Production," Economics Working Paper Archive wp_261, Levy Economics Institute.
    5. Lianos, Theodore P., 1979. "Domar's growth model and Marx's reproduction scheme," Journal of Macroeconomics, Elsevier, vol. 1(4), pages 405-412.
    6. Louis-Philippe Rochon, 1999. "Credit, Money and Production," Books, Edward Elgar Publishing, number 1565.
    7. Edward Nell, 2002. "On Realizing Profits in Money," Review of Political Economy, Taylor & Francis Journals, vol. 14(4), pages 519-530.
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    Cited by:

    1. Jochen Hartwig, 2014. "Relative Movements of Real Wages and Output," KOF Working papers 14-355, KOF Swiss Economic Institute, ETH Zurich.
    2. Jochen Hartwig, 2006. "Explaining the aggregate price level with Keynes's principle of effective demand," Review of Social Economy, Taylor & Francis Journals, vol. 64(4), pages 469-492.
    3. M. G. Hayes, 2008. "Keynes's Z function: a reply to Hartwig and Brady," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(6), pages 1003-1003, November.
    4. Jochen Hartwig, 2017. "The Comparative Statics of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 29(3), pages 360-375, July.
    5. repec:pke:wpaper:pkwp1211 is not listed on IDEAS
    6. Gechert, Sebastian, 2012. "The multiplier principle, credit-money and time," MPRA Paper 34648, University Library of Munich, Germany.
    7. Mariolis, Theodore & Soklis, George, 2014. "The Sraffian Multiplier for the Greek Economy: Evidence from the Supply and Use Table for the Year 2010," MPRA Paper 60253, University Library of Munich, Germany.
    8. Jochen Hartwig, 2009. "D and Z in ROPE," KOF Working papers 09-243, KOF Swiss Economic Institute, ETH Zurich.

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