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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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    Cited by:

    1. Gechert, Sebastian, 2012. "The multiplier principle, credit-money and time," MPRA Paper 34648, University Library of Munich, Germany.
    2. Jochen Hartwig, 2014. "Relative Movements of Real Wages and Output," KOF Working papers 14-355, KOF Swiss Economic Institute, ETH Zurich.
    3. 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.
    4. 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.
    5. repec:pke:wpaper:pkwp1211 is not listed on IDEAS
    6. Jochen Hartwig, 2017. "The Comparative Statics of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 29(3), pages 360-375, July.
    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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