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The paradox of thrift in a two‐sector Kaleckian growth model

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  • Lucrezia Fanti
  • Luca Zamparelli

Abstract

We analyze the paradox of thrift in a two‐sector Kaleckian growth model. We consider an economy with one consumption and one investment good, differential sectoral mark‐ups and profit rates equalization. We show that when the investment function depends on aggregate capacity utilization and on the aggregate profit share (the Bhaduri–Marglin investment function) the paradox of thrift in its growth version may fail if mark‐ups are higher in the investment good sector. In this case, an increase in the saving rate produces a reallocation of economic activity toward the investment good sector; the aggregate profit share rises and its positive effect on investment may offset the reduction in average capacity utilization if investment is relatively more sensitive to profitability than to the level of activity.

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  • Lucrezia Fanti & Luca Zamparelli, 2021. "The paradox of thrift in a two‐sector Kaleckian growth model," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 526-538, July.
    • Handle: RePEc:bla:metroe:v:72:y:2021:i:3:p:526-538
    DOI: 10.1111/meca.12332
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    1. Nishi, Hiroshi, 2022. "Income distribution, technical change, and economic growth: A two-sector Kalecki–Kaldor approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 418-432.

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    More about this item

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian

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