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Economic growth : a chain-reaction between increases in supply and increases in demand ?

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  • Villemeur, Alain
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    Abstract

    For 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 Info

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/6516.

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    Date of creation: Dec 2010
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    Publication status: Published in Working Paper Chaire Transitions démographiques transitions économiques, 2010
    Handle: RePEc:dau:papers:123456789/6516

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    Keywords: endogenous; Keynes; growth model; Schumpeter; United States; distribution; innovation;

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