Abstract
ABSTRACTThis paper analyses the relationship between the real wage rate and employment when we induce capital–labour substitution within a Post‐Keynesian Kaleckian model. To avoid the over‐determinacy problem, we consider a non‐homogeneous production function and cost minimization, in contrast to recent work that assumed a homogeneous production function and profit maximization. As a result, we find not only that increasing returns to scale are important in sustaining the long‐run stability condition, but also that if the increasing returns to scale are small, then it is more likely that employment will increase.
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