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Kaleckian Models of Conflict Inflation, Distribution and Employment: A Comparative Analysis

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  • Eckhard Hein
  • Christoph Häusler

Abstract

This paper conducts a systematic comparison of two main textbook variants within the Kaleckian tradition of post-Keynesian conflict inflation and distribution theory: the Blecker and Setterfield (2019) and Lavoie (1992; 2022) (BSL) model based on Dutt (1987), and the Hein (2023a) and Hein and Stockhammer (2011) (HS) model founded on Rowthorn (1977). Focusing on a basic closed economy framework sans government, we explore various iterations of each approach. Our analysis reveals that disparities chiefly centre around the treatment of price inflation expectations (‘indexation’) and the incorporation of bargaining power in wage- and price-inflation equations. BSL variants generally yield stable price Phillips curves, stable distribution and employment curves, and hence stable equilibria. Only the BSL-3 variant with complete indexation and complete pass-through generates shifting Phillips and employment curves, implying instability. It is thus similar to the HS-0 approach, which has bargaining power and complete indexation representing adaptive expectations in wage inflation and incomplete pass-through in price inflation. Introducing a workers’ wage share target directly into the wage-inflation equation, but keeping full indexation/adaptive expectations in wage inflation and incomplete pass-through in price inflation, allows for stable and even flat Phillips curves, stable distribution and employment curves, and hence stable equilibria in the HS approach.

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  • Eckhard Hein & Christoph Häusler, 2024. "Kaleckian Models of Conflict Inflation, Distribution and Employment: A Comparative Analysis," Review of Political Economy, Taylor & Francis Journals, vol. 36(4), pages 1436-1464, October.
    • Handle: RePEc:taf:revpoe:v:36:y:2024:i:4:p:1436-1464
    DOI: 10.1080/09538259.2024.2355557
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    References listed on IDEAS

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    1. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 23(2), pages 83-100.
    2. Joan Robinson, 1962. "Essays in the Theory of Economic Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-00626-7, March.
    3. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
    4. Marc Lavoie, 2006. "A Post‐Keynesian Amendment To The New Consensus On Monetary Policy," Metroeconomica, Wiley Blackwell, vol. 57(2), pages 165-192, May.
    5. Mario Cassetti, 2003. "Bargaining power, effective demand and technical progress: a Kaleckian model of growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(3), pages 449-464, May.
    6. Leonardo Vera, 2014. "The Simple Post-Keynesian Monetary Policy Model: An Open Economy Approach," Review of Political Economy, Taylor & Francis Journals, vol. 26(4), pages 526-548, October.
    7. Eduardo F Bastian & Mark Setterfield, 2020. "Nominal exchange rate shocks and inflation in an open economy: towards a structuralist inflation targeting agenda," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 44(6), pages 1271-1299.
    8. Philip Arestis & Malcolm Sawyer, 2005. "Aggregate demand, conflict and capacity in the inflationary process," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 29(6), pages 959-974, November.
    9. Marc Lavoie, 1992. "Foundations of Post-Keynesian Economic Analysis," Books, Edward Elgar Publishing, number 275.
    10. Eckhard Hein & Engelbert Stockhammer (ed.), 2011. "A Modern Guide to Keynesian Macroeconomics and Economic Policies," Books, Edward Elgar Publishing, number 13962.
    11. Dutt, Amitava Krishna, 1987. "Alternative Closures Again: A Comment on 'Growth, Distribution and Inflation.'," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 11(1), pages 75-82, March.
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    Cited by:

    1. Campana, Juan Manuel, 2024. "Currency devaluations, distribution conflict and inflation in a post-Kaleckian open economy model," IPE Working Papers 240/2024, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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