Abstract
Abstract This work aims to investigate the effect of changes in functional income distribution on growth in Brazil from 1952 to 2017. Following the neo-Kaleckian and Supermultiplier growth and distribution theories, it is possible to obtain two types of such effects. First, a level effect, predicted by both models, establishes a direct relationship of the wage share on the level of output through changes in the components of aggregate demand. Secondly, a growth effect occurs only in the neo-Kaleckian models and is the causal relationship between the wage share and output growth through the rate of capital accumulation. We analyzed the presence of these two effects in the empirical literature and found no evidence of a long run growth regime through capital accumulation as would be expected in the neo-Kaleckian model. However, we find empirical evidence that investment is an induced component of demand as is expected in the Supermultiplier model.
Highlights
This paper aims to study the effect of changes in functional income distribution on economic growth in Brazil from 1952 to 2017 from the viewpoint of the Neo-Kaleckian and the Supermultiplier growth models
Sponse function we find that a shock on the rate of growth of output has a positive effect on the growth rate of investment, which corroborates again the hypothesis of endogenous investment growth under steady state adopted in the Supermultiplier model
We have found that, given the granger causality tests, as well as the impulse response function and the variance decomposition of the VAR estimated for the long-run empirical work, the rate of growth of output is significant in explaining the behavior of the rate of growth of capital accumulation
Summary
This paper aims to study the effect of changes in functional income distribution on economic growth in Brazil from 1952 to 2017 from the viewpoint of the Neo-Kaleckian and the Supermultiplier growth models. Nova Economia v.31 n.1 2021 growth, and an actual growth effect, which must impact the steady state rate of growth This empirical work offers an important contribution to the debate on demand-led growth theories by differentiating the expected outcomes in the neo-Kaleckian growth model and in the Supermultiplier model. The empirical work emphasizes this difference between the level and the growth effect, and focuses on testing the transmission mechanism of income distribution to growth: the capital stock accumulation Since their very early contributions, post-Keynesian growth theories aim to extend the principle of effective demand from the short run to the long run, taking into account the effects of changes in income distribution over real output. Subsection 2.2 presents the Supermultiplier model as an alternative for studying the relationship between income distribution and growth
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