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Kaleckian Models Extended

In: Money, Distribution Conflict and Capital Accumulation

Author

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  • Eckhard Hein

Abstract

Further monetary extensions of the Kaleckian models are related to three important aspects. First, we shall distinguish between own capital and debt capital and we shall hence introduce the debt-capital ratio into the investment functions of the models. The long-run dynamics of this ratio will be studied in both variants of the Kaleckian model. Secondly, we shall explicitly consider the effects of changes in the rate of interest and in the debt-capital ratio also in the saving functions of the models. In the simple models discussed so far, we have implicitly assumed that changes in the rate of interest and hence in distribution between profits of enterprise and rentiers’ income do not affect the aggregate propensity to save out of profits. Since the propensity to save out of retained earnings is unity by definition, we have therefore implicitly assumed that the rentiers’ propensity is also unity. This is a serious restriction which has to be removed. Third, we shall also consider the possibility of an interest-elastic mark-up. Changes in the rate of interest may hence affect distribution between gross profits and wages.

Suggested Citation

  • Eckhard Hein, 2008. "Kaleckian Models Extended," Palgrave Macmillan Books, in: Money, Distribution Conflict and Capital Accumulation, chapter 13, pages 100-123, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-59560-6_13
    DOI: 10.1057/9780230595606_13
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