IDEAS home Printed from https://ideas.repec.org/p/tri/wpaper/1206.html
   My bibliography  Save this paper

Exploring the Supply Side of Kaldorian Growth Models

Author

Listed:
  • Mark Setterfield

    (Department of Economics, Trinity College)

Abstract

Recent Kaldorian growth models emphasize the need to reconcile the demand-led actual rate of growth and the potential rate of growth. This issue is revisited in light of criticism suggesting it is a “red herring”. An explicit model of the supply side is used to show that, in a mature economy, it is unlikely that steady-state, demand-led growth will always be automatically accommodated by the supply side. The conclusion reached is that attention must, therefore, be paid to the possible emergence of supply constraints on growth, and the implications thereof for steady-state, demand-led growth models.

Suggested Citation

  • Mark Setterfield, 2012. "Exploring the Supply Side of Kaldorian Growth Models," Working Papers 1206, Trinity College, Department of Economics.
    • Handle: RePEc:tri:wpaper:1206
    as

    Download full text from publisher

    File URL: http://www3.trincoll.edu/repec/WorkingPapers2012/WP12-06.pdf
    File Function: First version, 2012
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christian Schoder, 2012. "Hysteresis In The Kaleckian Growth Model: A Bayesian Analysis For The Us Manufacturing Sector From 1984 To 2007," Metroeconomica, Wiley Blackwell, vol. 63(3), pages 542-568, July.
    2. Thomas Palley, 2003. "Pitfalls in the Theory of Growth: An application to the balance of payments constrained growth model," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 75-84.
    3. Gabriel Porcile & Gilberto Tadeu Lima, 2010. "Real exchange rate and elasticity of labour supply in a balance-of-payments-constrained macrodynamics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(6), pages 1019-1039.
    4. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    5. John McCombie & Maurizio Pugno & Bruno Soro (ed.), 2002. "Productivity Growth and Economic Performance," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-50423-3.
    6. Philip Arestis & John S.L. McCombie & Roger Vickerman (ed.), 2006. "Growth and Economic Development," Books, Edward Elgar Publishing, number 3463.
    7. Mark Setterfield (ed.), 2010. "Handbook of Alternative Theories of Economic Growth," Books, Edward Elgar Publishing, number 12814.
    8. Peter Skott, 2012. "Theoretical And Empirical Shortcomings Of The Kaleckian Investment Function," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 109-138, February.
    9. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
    10. Anthony Philip Thirlwall, 2012. "Balance of Payments Constrained Growth Models: History and Overview," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 1, pages 11-49, Palgrave Macmillan.
    11. Amitava Krishna Dutt, 2006. "Aggregate Demand, Aggregate Supply and Economic Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 319-336.
    12. Eckhard Hein & Marc Lavoie & Till van Treeck, 2011. "Some instability puzzles in Kaleckian models of growth and distribution: a critical survey," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 587-612.
    13. A. P. Thirlwall, 2001. "The Relation between the Warranted Growth Rate, the Natural Rate, and the Balance of Payments Equilibrium Growth Rate," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 24(1), pages 81-88, September.
    14. Antonella Palumbo, 2009. "Adjusting Theory to Reality: The Role of Aggregate Demand in Kaldor's Late Contributions on Economic Growth," Review of Political Economy, Taylor & Francis Journals, vol. 21(3), pages 341-368.
    15. J. S. L. McCombie & A. P. Thirlwall, 1994. "Economic Growth and the Balance-of-Payments Constraint," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-23121-8.
    16. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague, December.
    17. Eckhard Hein & Marc Lavoie & Till van Treeck, 2012. "Harrodian Instability And The ‘Normal Rate’ Of Capacity Utilization In Kaleckian Models Of Distribution And Growth—A Survey," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 139-169, February.
    18. Setterfield, Mark, 1997. "'History versus Equilibrium' and the Theory of Economic Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(3), pages 365-378, May.
    19. Nicholas Kaldor, 1961. "Capital Accumulation and Economic Growth," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, chapter 0, pages 177-222, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roberto Veneziani & Luca Zamparelli & Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.
    2. Juan Carlos MORENO-BRID & Lorenzo NALIN & Edgar PEREZ-MEDINA, 2023. "Current External Challenges To The Economic Expansion Of Emerging Markets: An Analysis Of Chile, Colombia, Mexico, Turkey, Ghana And India For 2006-2021," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 23(2), pages 5-36.
    3. Guilherme R. Magacho & Danilo Spinola, 2024. "Supply and Demand in Kaldorian Growth Models: A Proposal for Dynamic Adjustment," Review of Political Economy, Taylor & Francis Journals, vol. 36(4), pages 1613-1634, October.
    4. Greg Hannsgen & Tai Young-Taft, 2015. "Inside Money in a Kaldor-Kalecki-Steindl Fiscal Policy Model: The Unit of Account, Inflation, Leverage, and Financial Fragility," Economics Working Paper Archive wp_839, Levy Economics Institute.
    5. Kvedaras, Virmantas & Garcimartín, Carlos & Astudillo, Jhonatan, 2020. "Balance-of-Payments constrained growth dynamics: An empirical investigation," Economic Modelling, Elsevier, vol. 89(C), pages 232-244.
    6. Robert A. Blecker, 2022. "New advances and controversies in the framework of balance‐of‐payments‐constrained growth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 429-467, April.
    7. Steven M Fazzari & Piero Ferri & Anna Maria Variato, 2020. "Demand-led growth and accommodating supply," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 44(3), pages 583-605.
    8. Christian Schoder, 2015. "Methodological, internal and ontological inconsistencies in the conventional micro-foundation of post-Keynesian theory," Working Papers 1518, New School for Social Research, Department of Economics.
    9. Juan Carlos Moreno-Brid & Lorenzo Nalin & Edgar Perez-Medina, 2023. "Current External Challenges to the Economic Expansion of Emerging Markets," Working Papers Series inetwp201, Institute for New Economic Thinking.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Distributive cycles and endogenous technical change in a BoPC growth model," Economic Modelling, Elsevier, vol. 77(C), pages 216-233.
    2. Eric Kemp‐Benedict, 2020. "Convergence of actual, warranted, and natural growth rates in a Kaleckian–Harrodian‐classical model," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 851-881, November.
    3. Sasaki, Hiroaki, 2012. "Is the long-run equilibrium wage-led or profit-led? A Kaleckian approach," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 231-244.
    4. Roberto Veneziani & Luca Zamparelli & Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.
    5. A. P. Thirlwall, 2013. "Economic Growth in an Open Developing Economy," Books, Edward Elgar Publishing, number 15208.
    6. Schoder, Christian, 2014. "Instability, stationary utilization and effective demand: A structuralist model of endogenous cycles," Structural Change and Economic Dynamics, Elsevier, vol. 30(C), pages 10-29.
    7. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    8. Eckhard Hein, 2016. "Secular stagnation or stagnation policy? Steindl after Summers," PSL Quarterly Review, Economia civile, vol. 69(276), pages 3-47.
    9. Marwil J. Dávila-Fernández, 2018. "Alternative Approaches to Technological Change when Growth is BoPC," Department of Economics University of Siena 795, Department of Economics, University of Siena.
    10. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Path dependence, distributive cycles and export capacity in a BoPC growth model," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 258-272.
    11. Matteo Lanzafame, 2014. "The balance of payments-constrained growth rate and the natural rate of growth: new empirical evidence," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(4), pages 817-838.
    12. Anthony Philip Thirlwall, 2012. "Balance of Payments Constrained Growth Models: History and Overview," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 1, pages 11-49, Palgrave Macmillan.
    13. Robert A. Blecker, 2022. "New advances and controversies in the framework of balance‐of‐payments‐constrained growth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 429-467, April.
    14. Gabriel, Luciano Ferreira & Jayme, Frederico G. & Oreiro, José Luis, 2016. "A North-South Model of Economic Growth, Technological Gap, Structural Change and Real Exchange Rate," Structural Change and Economic Dynamics, Elsevier, vol. 38(C), pages 83-94.
    15. John E. King, 2010. "Kaldor and the Kaldorians," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 7, Edward Elgar Publishing.
    16. Roberto Veneziani & Luca Zamparelli & Amitava Krishna Dutt, 2017. "Heterodox Theories Of Economic Growth And Income Distribution: A Partial Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1240-1271, December.
    17. Guilherme R. Magacho & Danilo Spinola, 2024. "Supply and Demand in Kaldorian Growth Models: A Proposal for Dynamic Adjustment," Review of Political Economy, Taylor & Francis Journals, vol. 36(4), pages 1613-1634, October.
    18. Guilherme Riccioppo Magacho, 2017. "Structural change and economic growth: Advances and limitations of Kaldorian growth models," PSL Quarterly Review, Economia civile, vol. 70(280), pages 35-57.
    19. Hein, Eckhard, 2015. "The principle of effective demand: Marx, Kalecki, Keynes and beyond," IPE Working Papers 60/2015, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    20. Guilherme Riccioppo Magacho, 2016. "Estimating Kaldor-Verdoorn’S Law Across Countries In Different Stages Of Development," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 140, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

    More about this item

    Keywords

    demand-led growth; potential rate of growth; natural rate of growth; Kaldorian growth models;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tri:wpaper:1206. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Miguel Ramirez (email available below). General contact details of provider: https://edirc.repec.org/data/edtrius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.