Abstract
This paper introduces technical progress along the lines of the Kaldor–Verdoorn law within a neo-Kaleckian model of growth and distribution that incorporates the Sraffian supermultiplier mechanism. The key features of the model include the interactive effects of endogenous technical progress, the non-capacity-creating demand component that grows at an exogenous rate and, in its long-run version, a Harrodian adjustment mechanism. It turns out that, whereas the model converges towards the normal rate of capacity utilization, the main tenets of the Keynesian model are still valid in the long run as well as in the short run in the sense that all of the average rates of accumulation, capacity utilization, and technical progress are lower during the traverse after the propensity to save or the share of profits goes up. The conditions under which the productivity regime can be wage-led are examined, and the possible effects of an exogenous technical shift are also discussed.
Highlights
Even with all the bustle of ‘the 4th industrial revolution,’ the recent decade has witnessed an apparent slowdown in productivity growth
We extend a version of the neo-Kaleckian model of growth found in Lavoie (2016), by adding to it considerations linked to an endogenous technical progress function
The negative mediumrun effect on the rate of capacity utilization is neutralized, and there is no effect left on the rates of either capacity utilization or accumulation, as is evident from (21) and (19). This is because the investment curve, which was shifted up in the medium run following the increase in productivity growth, comes back down to its original position while γ adjusts to regain the normal rate of capacity utilization
Summary
Even with all the bustle of ‘the 4th industrial revolution,’ the recent decade has witnessed an apparent slowdown in productivity growth. The purpose of the present paper is to introduce technical progress along the lines of the Kaldor–Verdoorn law within a neo-Kaleckian model of growth and distribution that incorporates a non-capacity-creating demand component that grows at an exogenous rate. There are models that incorporate the autonomous growth component within a neo-Kaleckian model of growth and distribution, as can be found in the papers of Lavoie (2014; 2016), Allain (2015; 2019), Dutt (2015; 2019), Pariboni (2016b), Nah and Lavoie (2017; 2018; 2019), and Hein (2018) It is this second strand which is at the heart of the present paper.
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