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Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy

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  • Thomas I. Palley

    (Independent Analyst, Washington)

Abstract

This paper compares Cambridge and neo-Kaleckian growth theory. Both are members of the post-Keynesian approach to growth and distribution, but the Cambridge model is a hybrid of Keynesian and classical features whereas the neo-Kaleckian model is Keynesian. The Cambridge approach assumes full capacity utilization, while the neo-Kaleckian approach assumes variable capacity utilization. The two theories rely on fundamentally different theories of income distribution. The Cambridge model has a class structure of saving that generates Pasinetti's (1962) theorem regarding irrelevance of worker saving for steady-state growth and distribution. That class structure can be included in the neo-Kaleckian model, generating a variant of the Pasinetti result whereby steady-state capacity utilization is independent of worker saving. Fiscal policy has similar growth effects in the two models, albeit via very different mechanisms. Both models suffer from lack of attention to the labor market.

Suggested Citation

  • Thomas I. Palley, 2013. "Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 79-104, January.
    • Handle: RePEc:elg:rokejn:v:1:y:2013:i:1:p79-104
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    Cited by:

    1. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    2. Eckhard Hein, 2018. "Autonomous government expenditure growth, deficits, debt, and distribution in a neo-Kaleckian growth model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(2), pages 316-338, April.
    3. Parui, Pintu, 2020. "Fiscal Expansion, Government Debt and Economic Growth: A Post-Keynesian Perspective," MPRA Paper 102740, University Library of Munich, Germany.
    4. Greg Hannsgen, 2014. "Fiscal Policy, Chartal Money, Mark-up Dynamics and Unemployment Insurance in a Model of Growth and Distribution," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 487-523, July.
    5. Valeria Cirillo & Marcella Corsi & Carlo D'Ippoliti, 2015. "Gender, class and the crisis," Working Papers CEB 15-026, ULB -- Universite Libre de Bruxelles.
    6. Köhler, Kasper, 2018. "The limits to profit-wage redistribution: Endogenous regime shifts in Kaleckian models of growth and distribution," IPE Working Papers 112/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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    More about this item

    Keywords

    Distribution; growth; Cambridge; neo-Kaleckian; ownership; fiscal policy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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