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The Italian economic decline in a Kaldorian theoretical perspective

Author

Listed:
  • Guglielmo Forges Davanzati

    (University of Salento (IT))

  • Rosario Patalano
  • Guido Traficante

Abstract

This paper analyses the Italian economic decline in a Kaldorian theoretical framework. On the theoretical ground we propose an interpretation of the Italian economic decline based on the continuous decline of domestic demand and the constant reduction of the rate of growth of labour productivity. This interpretation is consistent with the concept of decline, which involves a long-run perspective. We also consider the role of the banking sector as a factor driving aggregate demand and, in turn, labour productivity. We estimate a VAR for the period 2002-2015 to analyse jointly the evolution of public consumption, real GDP, private investments, credit supply, labour compensation and productivity. Our main empirical finding is that aggregate demand and credit supply significantly affect the path of labour productivity, consistently with Kaldor's second law.

Suggested Citation

  • Guglielmo Forges Davanzati & Rosario Patalano & Guido Traficante, 2016. "The Italian economic decline in a Kaldorian theoretical perspective," Working Papers PKWP1606, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp1606
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    References listed on IDEAS

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    3. Guglielmo Forges Davanzati, 2016. "Credit supply, credit demand and unemployment in the mode of Augusto Graziani," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(3), pages 264-278, July.
    4. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
    5. Federico Lucidi & Alfred Kleinknecht, 2010. "Little innovation, many jobs: An econometric analysis of the Italian labour productivity crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(3), pages 525-546.
    6. Alberto Alesina & Roberto Perotti, 1997. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 210-248, June.
    7. Alberto Alesina & Silvia Ardagna, 2010. "Large Changes in Fiscal Policy: Taxes versus Spending," NBER Chapters, in: Tax Policy and the Economy, Volume 24, pages 35-68, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Guglielmo Forges Davanzati, 2020. "The Italian Economic Decline and the Proposal of the State as Innovator of First Resort," Working Papers 0049, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    2. Matteo Deleidi & Walter Paternesi Meloni & Antonella Stirati, 2020. "Tertiarization, productivity and aggregate demand: evidence-based policies for European countries," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1429-1465, November.
    3. Matteo Deleidi & Walter Paternesi Meloni & Antonella Stirati, 2018. "Structural change, labour productivity and the Kaldor-Verdoorn law: evidence from European countries," Departmental Working Papers of Economics - University 'Roma Tre' 0239, Department of Economics - University Roma Tre.
    4. Jan Kodera & Quang Van Tran, 2016. "Odhad parametrů rozšířeného Kaldorova modelu a analýza stability stacionárního řešení [An Inflation Analysis Using an Endogenous Business Cycle Model]," Politická ekonomie, Prague University of Economics and Business, vol. 2016(7), pages 769-788.
    5. Fabrizio Antenucci & Matteo Deleidi & Walter Paternesi Meloni, 2019. "Demand and Supply-side Drivers of Labour Productivity Growth: an empirical assessment for G7 countries," Working Papers 0042, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.

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    More about this item

    Keywords

    Kaldor; Italy; aggregate demand; labour productivity;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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