Matrix multipliers, demand composition and income distribution: Post‐Keynesian–Sraffian theory and evidence from the world's ten largest economies

Abstract

AbstractThis paper builds and explores in detail a post‐Keynesian–Sraffian one‐country model of effective demand, which, on the one hand, extends the Kurz multiplier model to open–with state‐economies of single production and, on the other hand, is applicable to data from the National Input–Output Tables of the World Input–Output Database. Thus, it estimates the net output, import and employment matrix demand multipliers for the world's 10 largest economies. The overall findings provide general support for and new insights into Sraffian theoretical and policy arguments: (i) the multiplier effects depend heavily on the physical composition of autonomous demand; (ii) the incremental share of wages in net national income can move in either direction with an increase in the savings ratios out of wages and profits and/or the corresponding direct tax rates; (iii) there is, in general, no one‐to‐one correspondence between alternative tax–transfer policies and their multiplier effects; and (iv) there is not necessarily an inverse relationship between the overall level of the profit rate and the multiplier effects or the wage share.