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On the Over-determination Problem in a Two Sector Neo-Kaleckian Model

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  • Huang, Biao

    (Renmin University of China)

Abstract

In this paper, we aim to solve the over-determination problem in two-sector neo-Kaleckian models raised by Park (1995) against Dutt (1990). After summarising the over-determination problem and existing solutions, we argue that the over-determination problem is not caused by the incompatibility of sectors’ investment functions and equalised rates of profit, but rather the incompatibility of profit rate equalisation and the arbi-trarily given mark-up rates of different sectors. We propose to solve the problem by introducing an endogenous variable, the relative mark-up ratio, which makes the model perfectly determined and more logically consistent. We also discuss the adjustment mechanism from the short-run to the long-run equilibrium.

Suggested Citation

  • Huang, Biao, 2022. "On the Over-determination Problem in a Two Sector Neo-Kaleckian Model," Centro Sraffa Working Papers CSWP56, Centro di Ricerche e Documentazione "Piero Sraffa".
    • Handle: RePEc:ris:sraffa:0056
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    References listed on IDEAS

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    4. Park, Man-Seop, 1995. "A Note on the "Kalecki-Steindl" Steady-State Approach to Growth and Income Distribution," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(3), pages 297-310, September.
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    More about this item

    Keywords

    Two-sector neo-Kaleckian model; equalised profit rate; mark- up pricing; free competition;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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