Long-run convergence in a neo-Kaleckian open-economy model with autonomous export growth

Abstract

This study combines a neo-Kaleckian growth and distribution model with a sort of Sraffian supermultiplier mechanism in which autonomous demand is driven by foreign exports. Short-, medium- and long-run equilibria are considered. In the long-run case, the expectations of sales growth governing investment change adaptively, and this, combined with the autonomous growth rate of exports, produces convergence of the actual rate of capacity utilization to its normal rate. It is demonstrated that some aspects of the main Kaleckian results can be preserved not only in the short or medium run but also in the long run, in the sense that both (1) a decrease in the propensity to save, and (2) a change in income distribution favoring labor, bring about higher average rates of production growth and capital accumulation. However, the impact of a change in the profit share is shown to be subjected to the condition that the responsiveness of the real exchange rate with respect to the profit share has to be bounded from above, confirming that the scope for wage-led demand or wage-led growth can be limited by open-economy considerations, even within the supermultiplier context.