Tackling the instability of growth: A Kaleckian model with autonomous demand expenditures

This article presents a Kaleckian model enriched by introducing autonomous public expenditure which grows at an exogenous rate. It shows that the usual properties are not affected in the short run: growth is wage-led. But long run properties are strongly affected: public expenditure plays a role as an automatic stabilizer so that the accumulation rate converges on the growth rate of public expenditure. The effect of a change in income distribution on the growth rate is then only transient. However, the impacts on the level of variables (output, capital stock, labor, etc.) remain permanent. The research here also shows that this theoretical framework can provide a solution (depending on the parameters) to the 'second' Harrod knife-edge problem. In this case, Kaleckian outcomes are consistent with the convergence of the current utilization rate on the 'normal' rate, a result which has not been found in the existing literature.