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Unemployment and Growth: Putting Unemployment into Post Keynesian Growth Theory

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  • Thomas Palley

Abstract

Post Keynesian (PK) growth models typically fail to model unemployment. That shows up in the absence of an equilibrium condition requiring the growth of employment to equal labor-supply growth. Consequently, the models can have an imploding or exploding unemployment rate. The underlying analytical problem is failure to resolve the Harrod (1939)–Solow (1956) knife-edge problem. This paper shows how that knife-edge problem can be resolved via a Kaldor–Hicks technological progress function. It applies the concept to several different PK growth models. In the Harrod, super-multiplier, Cambridge, and neo-Kaleckian models the warranted rate rules the roost and natural rate forces have no impact on the equilibrium growth rate. However, in a modified neo-Kaleckian model, with labor market distribution conflict, both warranted rate and natural rate forces impact steady state growth.

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  • Thomas Palley, 2019. "Unemployment and Growth: Putting Unemployment into Post Keynesian Growth Theory," Review of Political Economy, Taylor & Francis Journals, vol. 31(2), pages 194-215, April.
    • Handle: RePEc:taf:revpoe:v:31:y:2019:i:2:p:194-215
    DOI: 10.1080/09538259.2019.1644729
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    Cited by:

    1. Alessandro Bellocchi & Giuseppe Travaglini & Beatrice Vitali, 2023. "How capital intensity affects technical progress: An empirical analysis for 17 advanced economies," Metroeconomica, Wiley Blackwell, vol. 74(3), pages 606-631, July.
    2. Kazi Musa & Norli Ali & Jamaliah Said & Farha Ghapar & Oleg Mariev & Norhayati Mohamed & Hirnissa Mohd Tahir, 2023. "Does the Effectiveness of Budget Deficit Vary between Welfare and Non-Welfare Countries?," Sustainability, MDPI, vol. 15(5), pages 1-22, February.
    3. Soumya Datta & C. Saratchand, 2021. "Kaleckian conflict inflation with endogenous labor supply," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 238-259, May.
    4. Di Bucchianico, Stefano, 2021. "Inequality, household debt, ageing and bubbles: A model of demand-side Secular Stagnation," IPE Working Papers 160/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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