Kaldorian Model Research Articles

ASSESSING THE SUSTAINABILITY OF ADVANCED AND DEVELOPING COUNTRIES: A DIFFERENT PERSPECTIVE

Purpose – The research aim of the article is the analysis of advanced/developed and developing countries in the context of sustainable development, using invariant coordinate system in energy units, as well as the impact of structural changes in the economy affect the possibility of transition to sustainable development and creation post-industrial society. Research methodology – In order to achieve the aim were applied the method of socio-economic systems power changes analyzing in the frame of structural economic Kaldor model of GDP and the energy flows models. Finding – The advanced countries have seen a trend of “zero growth” and a decrease in useful energy production in the last 10 years. These countries have high labor productivity, technological level and diminishing potential for sustainable development. China is in the stage of “growth and development” and has great potential. Data calculated by the authors of the article correlates with the findings of the Kaldor model. Research limitation – The initial interpretation of the calculated data of France, Germany, Japan, USA, European Union and China was made. Countries have been analyzed in the period from 1990 to 2019. The data of the Central Statistical Office of EU and the World Bank were used. Practical implications – The results of the study can be used to further planning and design of transition to sustainable development for advanced and developing countries. Originality/Value – within the framework of the approach, an invariant coordinates system in energy units is proposed and the main parameters for assessing the potential of growth and sustainable development for advanced countries were formed.

Nonlinear Kaldor model augmented with retardation and anticipation

Nonlinear Kaldor model augmented with retardation and anticipation

Manufacturing and Economic Growth in Jordan (A Test of Kaldor’s Laws)

Purpose:  The study aims to test the applicability of “the three Kaldor’s hypotheses of growth” in the Jordanian economy, by measuring the impact of the growth of the manufacturing sector on both the real GDP and the productivity of the labour component in the industrial and non-industrial productive sectors. Design/methodology/approach:  The three Kaldor model equations were estimated using ARDL bound test approach to test the long–term relationships between the variables, using annual time series data for the period 1990-2019, according to the reports issued by the Central Bank of Jordan and the Jordanian Department of Statistics. Findings:  The study’s findings show a positive and significant long-term effect of the growth of the manufacturing sector on the growth of both GDP and the productivity of the labour component in the industrial and non-industrial sectors. This confirmed the validity of applying Kaldor’s hypotheses of growth to the Jordanian economy during the study period.  Social implications: The study recommended developing a system of legislation for industrial investment to encourage the establishment of large-scale industries, and stimulate similar small- and medium-scale industries to merge taking advantage of the economies of scale. This raises the productivity of the production factors and then enhances the economic growth rates. Originality/value: The importance of the study emerges from the fact that it deals with a vital sector, that plays an important role in growth and economic development, due to its backwards and forwards linkages with other economic sectors, and being one of the few studies that dealt with the Caldor's three hypotheses comprehensively and in the modern analytical ARDL approach. &nbsp

A business-cycle model connecting heterogeneous micro investment behaviors with macro dynamics

To analyze the effect of animal spirits on economic dynamics, we construct a simple Keynesian business-cycle model with animal spirits incorporated into it. Similar to the well-known Kaldor model, we assume that each firm possesses the investment function depending on demand, in which the animal spirits are connected with the degree of the propensity to invest. However, we would like to emphasize that, unlike the Kaldor model, even if the level of demand for each firm is the same, the degree of propensity to invest (i.e., the strength of animal spirits) depends on the change in demand. Thus, we assume that animal spirits in demand-upswing phases are stronger than those in demand-downswing phases. In each phase, the degree of dependence on demand is firm specific. Therefore, we adopt a statistical approach to connect such heterogeneous micro-investment behaviors with a macro-investment function. Through this approach, some kind of nonlinearity is naturally introduced into the macro-investment function. We demonstrate that the nonlinear macro-investment function yields persistent business cycles. We also demonstrate the occurrence of a generalized Hopf bifurcation.

Complex dynamics of a Kaldor model of business cycle with discrete-time

This paper studies the dynamical behavior of a Kaldor model of business cycle with discrete-time analytically and numerically. The conditions and the critical coefficients for the flip (period-doubling), Neimark-Sacker, and strong resonances are computed analytically. By using the critical coefficients, the bifurcation scenarios are determined for each of the deleted bifurcation points. Bifurcation curves of fixed points and cycles with periods up to sixteen by changing one and two parameters along with all codim-1 and codim-2 bifurcations on the corresponding curves are computed using the numerical continuation method. Numerical analysis confirms our analytical results and reveals more complex dynamical behaviors.

Income distribution, technical change, and economic growth: A two-sector Kalecki–Kaldor approach

This paper presents a two-sector Kalecki–Kaldor model of income distribution, technical change, and economic growth. The model is Kaleckian in the sense that it incorporates mark-up pricing, investment independent of saving, and excess capacity. It is also Kaldorian, in that labour productivity growth is led by Kaldor’s technical progress function. In other words, productivity growth is endogenously realised through the technology embodied in new capital stock, which differentiates our model from previous two-sector models. Our extension drastically changes the standard Kaleckian implications. We find that although the economic activity levels in the short run are led by the demand and income distribution parameters, economic growth in the long run is realised by supply-side (i.e. technical change and the associated productivity and wage growth) parameters. The important implication of our findings is that a two-sector economy faces a trade-off between a high economic growth rate and the local stability of the steady state.

The Contribution of Agricultural Manufacturing in the Egyptian Economic Growth: Kaldor's Hypotheses

This research uses a Kaldor’s hypotheses to estimate the contribution of the agricultural manufacturing sector to increase the economic growth of the Egyptian agricultural sector during the period 1997-2018. It based on the three "hypotheses" of growth. Kaldor model depends on three hypotheses related to the relationship between the growth of manufacturing sector and the economic growth. The study used the growth rate, dummy variable, Ordinary Least Square (OLS) test, and used CUSUM squares test and Chow breakpoint test. In addition to, testing the stability of time series depended on E-view 11.0. The food, beverage, tobacco industries and textiles industry are the largest two sectors in the Egyptian agricultural manufacturing industries, as they represent about 83.58% of the total value of the agricultural manufacturing industries output during the period 1997-2018. The results shows that the increase of real growth rates of food, beverage, tobacco industries and textile production lead to increasing in the real growth rate of agricultural output. According to CUSUM Sq test and Chow test, the year 2003 is considered as the switch point for the study variables. Also, if the real agricultural manufacturing production growth rate increases, the real agricultural manufacturing labor productivity growth rate will increase. And if the real growth rate of agricultural manufacturing production value increases, the real growth rate of agricultural non-manufacturing labor productivity will increase. The results of the research assist decision-makers in the field of manufacturing industry and agriculture in Egypt, especially in the stages of economic development.

Sustainability over sets and the business cycle

Many rigorous works have examined the behavior of Kaldor business cycle models. In this paper, utilizing the sustainability over sets (SOS) concept, a general theorem is proven establishing necessary and sufficient conditions for the existence and identification of rectangular sustainable sets for a general Kaldor model. These conditions can be readily verified, either in the two-dimensional space of lower and upper bounds on income, or in the one-dimensional space of upper bound on income, thus enabling identification of the region of economic sustainability for the considered Kaldor model. The Theorem’s power is illustrated with a case study of a particular Kaldor business cycle model from the literature that can exhibit rich dynamic behavior, and can give rise to economic sustainability regions that encompass multiple stable equilibrium points. Furthermore, a methodology is also presented that identifies non-rectangular sustainable sets, when the imposition of tight lower and upper bounds on one of the economic system variables (e.g., income) prevents the existence of a sustainable rectangular set.

An outlier analysis on the trend of Indonesian propensity to save

Economic cycle is in the interest of researchers as well as governments. Kaldor model of economic cycle is among the existing models. This model is a system consists of two difference equations for discrete model, and two differential equations for continuous model. Two functions of time playing role to the model are capital and production. Saving and investment as functions of capital and production also appear in the model. Often, saving is assumed as a linear function where it is a multiplication of production and a parameter the so-called propensity to save. Hence, it is assumed to be constant. In this paper, Indonesian propensity to save was analyzed. The production is the gross domestic product (GDP). The data of GDP and saving were collected from World Bank. Outlier detection was applied to anlyze the data. Neglecting the outlier, the propensity to save was obtained in the form of logarithmic function. The finding is inline with an economic assumption, and it will be important for studying the Indonesian economy.

Global inequities and healthcare disparities: can they be eliminated ethically?

Purpose The purpose of this paper is to comprehensively explore and propose solutions to global economic inequities and disparities, with a particular focus on healthcare. This paper also aims to explore whether drastic reductions of inequality are justified in terms of conventional economic theory, and whether ending inequality can be viewed as ethical through certain lenses. Design/methodology/approach To seek the response to those questions, the paper uses Pareto optimality; Hicks–Kaldor model; Millian utilitarianism; the ethical theories developed by John Rawls in his 1971 work on ethics as well as his 1999 Law of People; and the capability approach developed by Noble Laureate economists Amartya Sen. As demonstrated, those equalizing works cannot support a policy that would advocate an end to global inequities. Those theories also propose no practical solutions for the end of those extreme inequities. Thus, the paper attempts to present other solutions. Findings This paper discusses two theories that are very helpful in supporting those without much wealth. Mohammad Yunus’ Grameen Bank and its provision of small free-interest loans to poor businesses (in particular women) in Bangladesh has been very successful. Another alternative advocating interest-free banking that was proposed by the proponents of binary economics is discussed. Originality/value The author believes the arguments used to support the theses of this paper be unique and novel.

A three-country Kaldorian business cycle model with fixed exchange rates: A continuous time analysis

<p style='text-indent:20px;'>This paper analyses a three-country, fixed exchange rates Kaldorian nonlinear macroeconomic model of business cycles. The countries are connected through international trade, and international capital movement with imperfect capital mobility. Our model is a continuous time version of the discrete time three-country Kaldorian model of Inaba and Asada [<xref ref-type="bibr" rid="b22">22</xref>]. Their paper provided numerical studies of the dynamics of the three countries under fixed exchange rates. This paper provides analytical examinations of the local stability of the model´s equilibria, and of the existence of business cycles. The results are illustrated by numerical simulations.</p>

The debate about Sraffian Supermultiplier Model and the future of heterodox growth models

ABSTRACT This paper aims to present the recent debate about Sraffian Supermultiplier Model (SSM), that gained notoriety in the academic environment after the controversy between Peter Skott (2016) and Marc Lavoie (2016, 2017) on the specification of the investment function of the Neo-Kaleckian models of income growth and distribution. Lavoie used the SSM model as an attempt to rescue the Neo-Kaleckians models of the devastating criticism made by Peter Skott (2010) regarding the specification of the investment function. In this context, we will not only argue that this rescue operation was not successful, but we will also question the capacity of SSM models to serve as an “alternative closure” for heterodox models of income growth and distribution, due to three fundamental shortcomings of the SSM approach, which are: (i) the hypothesis that the normal degree of utilization of the productive capacity is an exogenous variable, (ii) that investment in capacity expansion is totally endogenous; and (iii) the applicability of this approach out of a closed economy framework. We will also argue that the Kaldorian models of growth, which are one of the theoretical foundations of the so-called Developmentalist Macroeconomics, and stock-flow consistent models (SFC) seem to be much more promising alternatives for the development of heterodox theories of growth and income distribution.

Structural change and cumulative causation: A Kaldorian approach

AbstractThis paper presents a multisectoral model based on Kaldor's approach to explain the importance of structural change and cumulative causation. Divergence in countries' growth rates in Kaldorian models are explained either by different degrees of increasing returns among sectors on the supply side or by different income elasticities of exports and imports on the demand‐side, but it is not explained by both factors together. In this vein, a multisector growth model that combines different sectoral income elasticities and different sectoral increasing returns is built to explain how structural changes toward high‐tech industries can trigger a process of cumulative causation and ensure higher growth rates in the long run.

Stability analysis of a delay differential Kaldor's model with government policies

This paper is devoted to analysis of the stability of the economy according to an extended version of Kaldor's economic growth model. We consider the role of the government and its simultaneous monetary and fiscal policies and we study whether or not a time delay between the recognition and the implementation of its fiscal policy can affect the economic stability. Numerical simulations provide further conclusions about the long-term behavior of the four variables modeled—namely, national income, capacity of production, bonds value and money supply.

A SUMMARY OF KALECKIAN AND KALDORIAN MODELS ON INCOME DISTRIBUTION

There are two main lines of theories about income distribution, following the seminal papers of Kalecki and Kaldor. These two theories have different aspect in terms of their assumptions about competitive characteristics of market, capital utilization, market imperfections and the role of government. Several studies are designed to develop these two theories and some studies use assumptions of both theories in order to explain the income distribution. This article includes a summary of Kaleckian and Kaldorian models; their assumptions and recent contributions to these models.

Dynamics of a twocountry Kaldorian model of business cycles with fixed exchange rates: the case of Slovakia and the Czech Republic

Dynamics of a twocountry Kaldorian model of business cycles with fixed exchange rates: the case of Slovakia and the Czech Republic

Mudança Estrutural, Hiato Tecnológico e Capital Humano em um Modelo Norte-Sul de Crescimento com Restrição de Balanço de Pagamentos

Resumo Este artigo tem como objetivo apresentar um modelo macrodinâmico Kaldoriano em que o processo de convergência ou divergência entre o Norte (desenvolvido) e o Sul (em desenvolvimento) é uma função da mudança estrutural e do hiato tecnológico. A participação da indústria na economia do Sul e o hiato tecnológico se tornaram endógenos para explicar a dinâmica do crescimento compatível com o equilíbrio no Balanço de Pagamentos. Para que ocorra o processo de catching up, há a necessidade do aumento das atividades inovativas do Sul. O modelo desenvolvido exibe equilíbrios múltiplos: um estável e outro instável. No equilíbrio estável, o Sul deve apresentar, conjuntamente, maior desenvolvimento do seu Sistema Nacional de Inovações e elevados efeitos de spillovers industriais em relação ao nível de hiato tecnológico existente.

Explicit investment setting in a Kaldor macroeconomic model with macro shock

As the inevitable attributes of macro shocks on macroeconomic system, in this paper, we develop a Kaldor macroeconomic model with shock. The shock is due to the investment uncertainty. We then provide an approach for macroeconomic control by calibrating the evolvement of the shocked Kaldor macroeconomic model with some expected benchmark process. The calibration is realized through the setting for investment. The benchmark process is usually the reflection of decisions or policies. An optimal investment setting associated with a five-dimensional nonlinear system of ordinary differential equations is presented. Through a logical modification for the boundary conditions, the nonlinear system is simplified to be linear and a completely explicit formula for the optimal investment setting is achieved. The rationality of the modification is supported by some stability condition. To cope with the systematic risk caused by the macro shock, we define a dynamic Value-at-Risk(VaR) as the risk measure capturing the risk level of the shocked Kaldor macroeconomic model and introduce a risk constraint into the programming of calibration. Then a constrained investment setting is presented. Finally, we carry out an application of the theoretical results by calibrating the evolvement of the shocked Kaldor macroeconomic model with the business cycle generated from the classical Kaldor model through the investment setting.

A note on the influence of saving behaviors on economic growth

AbstractThe Kaldor model describes the dynamics of economic growth over time. Many works showed that a large variety of qualitative dynamics can be produced depending on the economic assumptions. This work provides conditions to mark boundaries during boom and bust cycles, investigating how saving behaviors of workers and shareholders and elasticity of substitution between capital and labor influence the growth dynamics of non‐developed, developing and developed countries considering general and specific technologies of production. The results obtained can be used by policy‐makers to increase the lower level an economy can reach during boom and bust periods and reduce fluctuations.

Wage-led, debt-led growth in an open economy*

We argue that a fundamental difference between the various post-Keynesian approaches to economic growth lies in their treatment of investment. Neo-Kaleckian models, which are more appropriately Robinsonian models, postulate an investment function dependent on profitability, and that is partly autonomous from income. Some of these models rely on the importance of profitability, captured by the profit share, to make the case for profit-led growth. For their part, Kaldorian models, which are in our view compatible with Sraffian models, place the emphasis on the accelerator in the determination of investment. More importantly, since investment is a derived demand, that is, ruled by the adjustment of capacity to autonomous demand, there is a tendency to a normal level of capacity utilization. These are supermultiplier models. In our view the Kaldorian approach is better equipped to deal with some of the issues relating income distribution to accumulation with effective demand in an open economy in the long run. We develop an open economy model to examine the conditions under which an increase in real wages can produce wage-led growth, showing that the limit to wage-led expansion is a binding external constraint. The model is unique in emphasizing the role of income distribution in affecting real exchange rates, and it is through this channel that the ambiguous effects of income distribution on growth arise. We also provide some evidence indicating that real wages are positively related to growth, investment, and capacity utilization, and we highlight the role of finance in sustaining expansions suggesting that debt-led growth should not be identified with profit-led growth.