Economic growth : a chain-reaction between increases in supply and increases in demand ?
AbstractFor Kaldor (1972), economic growth is the resultant of a chain-reaction between increases in supply and increases in demand. In order to show the interest of this view, I represent this growth process by an entrepreneurial growth model based on the principle of effective demand. The aggregate supply function makes use of Keynes’ and Schumpeter’s complementary views of the entrepreneur’s behavior. The growth process is a process of continuing disequilibrium, but in the long term steady states can be found. They have unexpected theoretical properties : the output growth rate is a linear function of the employment growth rate and of the investment rate (or the saving rate), while the profit share in the income is exactly 1/3. The theoretical lessons turn out to be consistent with the numerous stylized facts listed by Kaldor, Barro and Sala-i-Martin as well as with the realities of the American economy from 1960 to 2000. Those results back up the view of the growth process expressed by Kaldor.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/6516.
Date of creation: Dec 2010
Date of revision:
Publication status: Published in Working Paper Chaire Transitions démographiques transitions économiques, 2010
endogenous; Keynes; growth model; Schumpeter; United States; distribution; innovation;
Find related papers by JEL classification:
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
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