Kaleckian Approach Research Articles

Inflation and Distribution during the post-COVID Recovery: A Kaleckian Approach

Inflation and Distribution during the post-COVID Recovery: A Kaleckian Approach

Understanding the Brazilian demand regime: a Kaleckian approach

The empirical literature on Kaleckian growth and distribution models consists almost exclusively of studies of developed countries. These studies have used varied econometric techniques and estimation methods, but little attention has been given to developing countries. Onaran and Galanis (2013) provide an extensive review of this literature, and they complement it by estimating models for some developing countries. However, owing to lack of data they were unable to estimate their model for Brazil. This paper expands the empirical literature by applying it to Brazil. The Brazilian demand regime is analysed for the period of 1956–2008, using functional distribution of income data supplied by Adalmir Marquetti (which was developed in a paper by Marquetti et al. 2010). The paper estimates the open-economy Bhaduri–Marglin model using the single-equation technique outlined in Hein and Vogel (2008). The results of the estimation show that the demand regime in Brazil is wage-led domestically despite being an open economy. Consequently, increases in the profit share tend to diminish demand. The paper concludes with some policy implications of the findings.

Financialization and the Labor Share of Income

Abstract Financialization has been growing importance in macroeconomic perspectives since the finance-dominated capitalist relations have captured many of the specific positions in an aggregate economy. However, the empirical literature has substantially ignored the examination of the link between an increasing scale of financialization and the rising income inequality. In this study, a major hypothesis is based on the fact that the finance-dominated capitalism has a considerable effect on distributional practices through the channels of bargaining power. By applying the Kaleckian approach, the paper investigates the relationship between financialization and the labor share of national income using a panel dataset of 52 countries over the 1992-2012 period. The results suggest that a higher level of stock market development leads to a more unequal distribution of income and, thus, to the decline of wage share in the national income. Other factors such as globalization and technical change can also exacerbate the decline of wages, coupled with a decrease in the bargaining position of labor measured by unemployment rate and labor force participation rate.

Karl Marx's thoughts on functional income distribution: a critical analysis from a Keynesian and Kaleckian perspective

In Marx's explanation of functional income distribution, wages are given as a basket of goods needed for the reproduction needs of the working class. Profits are then the remaining part of income creation. Marx's explanation of functional income distribution has several theoretical and practical shortcomings. The Keynesian paradigm in the traditional works of Keynes and Kalecki provides alternative explanations of functional income distribution. Here the profit rate is given by processes in the financial market and the degree of financialisation. Also the degree of monopoly influences functional income distribution. The Keynesian and Kaleckian approach allows a plausible interpretation of the changes in functional income distribution during recent decades.

Who should bear the pain of price competition? A Kaleckian approach

Ongoing globalization and the rise of neoliberalism have intensified price competition in domestic and international markets. If we consider a cost reduction owing to price competition, an important question arises: what is the most effective way of reducing costs to stimulate output and growth? By constructing a Kaleckian model with an intermediate goods sector and a final goods sector, we show that reducing the mark-up rate in the latter sector rather than the former promotes capacity utilization and capital accumulation. Moreover, we show that transferring the burden of the cost reduction onto workers in the intermediate goods sector decreases the demand and growth rate.

Karl Marx's thoughts on functional income distribution: a critical analysis from a Keynesian and Kaleckian perspective

In Marx's explanation of functional income distribution, wages are given as a basket of goods needed for the reproduction needs of the working class. Profits are then the remaining part of income creation. Marx's explanation of functional income distribution has several theoretical and practical shortcomings. The Keynesian paradigm in the traditional works of Keynes and Kalecki provides alternative explanations of functional income distribution. Here the profit rate is given by processes in the financial market and the degree of financialisation. Also the degree of monopoly influences functional income distribution. The Keynesian and Kaleckian approach allows a plausible interpretation of the changes in functional income distribution during recent decades.

Euro area growth differentials: diverging and reinforcing factors in a Kaleckian SVAR approach

The aim of this paper is to identify the euro area economic heterogeneity by disentangling the factors and characteristics shaping and exacerbating growth differentials between surplus and deficit countries. The five Kaleckian determinants of profits are used in the paper as the interpretative framework to assess the sources of divergence. According to an SVAR methodology, eight diverging factors and six reinforcing factors were detected as drivers of the differentials. It follows that the two regions represent different economic structures and that this dichotomy, in turn, means that symmetric shocks have asymmetric effects, while asymmetric shocks reinforce the regional differences. An endogenous investment-GDP feedback process and an investment–unemployment loop are mutually reinforcing mechanisms, which impair the production base and constrain future growth, so temporary shocks have long-lasting effects. The analysis emphasizes the need to rethink the European macro mechanism and to achieve a common and shared macro strategy that goes beyond national political interests and inclusively pursues the same objective: convergence.

Investment and the banking system: a Kaleckian approach for regions in Brazil

ABSTRACT This paper analyzes the effects of the regional distribution of the banking system on investment rates in Brazil. The investigation relies on a perspective whereby the role of external funds in inducing firms’ investment is determined by the disparate regional distribution of the banking system. Empirical results from a panel-data multilevel model indicate that the regional concentration and centralization of the banking system are relevant for firms’ investment choices. More importantly, the fitness of the multilevel model indicates the need to consider that investment rates vary according to a regional hierarchical banking structure (centre versus periphery).

Toward the crisis: a Kaleckian-Keynesian interpretation of the instability of growth and capital accumulation in Brazil

This article examines theoretically and empirically the instability of Brazilian investment and growth for the past couple of decades, highlighting the evolution that led to the current crisis. A theoretical discussion highlights the importance of Kaleckian and Keynesian approaches in understanding the semi-stagnation of the Brazilian economy since the 1990s. Empirical evidence shows that investment has increased until 2013, but not to the point of getting the economy back on the track of high growth rates and higher investment-GDP ratios. The econometric findings are compatible with the theoretical underpinnings of investment activity based on Keynes and Kalecki and suggest the existence of room for activist policies in Brazil in order to stimulate economic activity.

Dynamics of Capital Accumulation and Distribution: A Critique and Alternative to Kaleckian Empirical Approaches

Dynamics of Capital Accumulation and Distribution: A Critique and Alternative to Kaleckian Empirical Approaches

Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective

AbstractThe paper examines the determinants of income and wealth inequality in a Kaldorian model. The approach is different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long‐run adjustment of utilization. The analysis identifies several developments that may have increased inequality since the 1980s, including the shift of the power relation in favor of top managerial pay, the decline in the retention rate, increasing share buybacks, rising indebtedness of lower‐income households and stock market booms. In contrast to Piketty's explanation, the decline in the natural growth rate reduces inequality in this Kaldorian framework.

Profit sharing and its effect on income distribution and output: a Kaleckian approach

This study investigates how profit sharing influences the economy by using a Kaleckian model. Unlike existing research, I endogenise the profit share. The analysis shows that profit sharing decreases or increases the equilibrium capacity utilisation rate depending on whether the productivity-enhancing effect of profit sharing is weak or strong. Moreover, the presented numerical simulations show that the profit-sharing effects on income distributions differ according to the relative strength of the productivity-enhancing effect of profit sharing.

Finance-Dominated Capitalism and Income Distribution: A Kaleckian Perspective on the Case of Germany

We present an investigation into the long-run effects of financialisation on income distribution before the financial and economic crises for Germany, one of the major mercantilist export-led economies. The analysis builds on a Kaleckian approach towards the examination of the effects of financialisation on income distribution, as suggested by Hein (Camb J Econ. doi: 10.1093/cje/bet038 , 2014a). First, we show that Germany saw considerable re-distribution of income starting in the early 1980s, which accelerated in the early 2000s, in particular. Examining the three main channels through which financialisation (and neo-liberalism) are supposed to have affected the wage or the labour income share, according to the Kaleckian approach, we provide evidence for the existence of each of these channels in Germany since the mid-1990s, when several institutional changes provided the conditions for an increasing dominance of finance.

Finance-dominated capitalism and re-distribution of income: a Kaleckian perspective

In this article a major channel through which financialisation or finance-dominated capitalism affects macroeconomic performance is examined: the distribution channel. Empirical data for the following dimensions of (re-)distribution in the period of finance-dominated capitalism since the early 1980s is provided for 15 advanced capitalist economies: functional distribution, personal/household distribution and the share and the composition of top incomes. Based on the Kaleckian approach to the determination of income shares, the effects of financialisation on functional income distribution are studied in more detail. Some stylised facts of financialisation are integrated into the Kaleckian approach, and by means of reviewing empirical and econometric literature it is found that financialisation and neoliberalism have contributed to the falling labour income share since the early 1980s through three main Kaleckian channels: 1) a shift in the sectoral composition of the economy, 2) an increase in management salaries and rising profit claims of the rentiers and thus in overheads, and 3) weakened trade union bargaining power.

Finance-Dominated Capitalism and Redistribution of Income: A Kaleckian Perspective

This paper examines a major channel through which financialization or finance-dominated capitalism affects macroeconomic performance: the distribution channel. Empirical data for the following dimensions of redistribution in the period of finance-dominated capitalism since the early 1980s is provided for 15 advanced capitalist economies: functional distribution, personal/household distribution, and the share and composition of top incomes. Based on the Kaleckian approach to the determination of income shares, the effects of financialization on functional income distribution are studied in more detail. Some stylized facts of financialization are integrated into the Kaleckian approach, and by means of reviewing empirical and econometric literature it is found that financialization and neoliberalism have contributed to the falling labor income share since the early 1980s through three main Kaleckian channels: (1) a shift in the sectoral composition of the economy; (2) an increase in management salaries and rising profit claims of the rentiers, and thus in overheads; and (3) weakened trade union bargaining power.

The impact of fiscal austerity in the Eurozone

This paper presents a framework to assess the likely impact of fiscal austerity in the Euro area, as a response to the turmoil in the financial markets. We provide some evidence on the sequence of events which generated public deficits and debts, and show that rising debts and deficits were the outcome of the external shock which hit the European economies from 2007 onwards, given the institutional setting, rather than the cause. After reviewing the theory supporting austerity as a solution to the crisis, we discuss the macroeconomics of austerity with the help of a stock-flow-consistent accounting structure in the context of a Keynesian–Kaleckian approach.

Is the long-run equilibrium wage-led or profit-led? A Kaleckian approach

This paper presents a Kaleckian growth model in which (i) the rate of capacity utilization, the profit share, and the rate of employment are adjusted in the medium run, and (ii) the normal rate of capacity utilization and the expected rate of growth are adjusted in the long run. Both the Kalecki-type and the Marglin–Bhaduri-type investment functions are introduced. Using the model, we examine which regime is obtained in the long-run equilibrium, the wage-led growth regime or the profit-led growth regime.

Distribution and Growth: A Dynamic Kaleckian Approach

This paper studies the effects of an (exogenous) increase of nominal wages on profits, output, and growth. Inspired by an article by Michal Kalecki (1991), who concentrated on the effects on total profits, the paper develops a model that explicitly considers the dynamics of demand, prices, profits, and investment. The outcomes of the initial wage rise are found to be path dependent and crucially affected by the firms’ initial response to an increase in demand and a decrease in profit margins. The present model, which relates to other Post Keynesian/Kaleckian contributions, can offer an alternative to the mainstream approach to analyzing the effects of wage increases.

Tax policy and innovation: A search for common ground

The paper is motivated by a desire to find common ground between mainstream and post-Keynesian approaches to fiscal policy. A post-Keynesian approach with origins in Kalecki offers a promising line of enquiry which is developed here. The paper identifies the principal differences between the Keynesian and Kaleckian approaches. The possibilities are explored of finding accommodation between the mainstream and Kaleckian approaches to the taxation of greenhouse gases. The macroeconomic implications of taxing greenhouse gases are identified. However, these may be thwarted by the emergence of ›political aspects of innovation‹, akin to Kalecki’s ›political aspects of full employment‹. A Kaleckian balanced budget approach allied to fiscal incentives to innovate offers some prospect of common ground with the mainstream.

Modelos de crescimento kaleckianos: uma apreciação

Kaleckian economic growth models: an analysis. The purpose of this article is to survey the main papers that founded a kaleckian approach of the economic growth. It presents a certain moment of the historical evolution of the non-neoclassical macrodynamics. This analysis can be understood under the political economy tradition in putting together social classes (capitalists and workers), distributive conflict and the relationship between distribution and accumulation.