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'Financialisation' in Kaleckian/Post-Kaleckian models of distribution and growth

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Author Info

  • Eckhard Hein

    ()
    (IMK at the Hans Boeckler Foundation)

  • Till van Treeck

    ()
    (IMK at the Hans Boeckler Foundation)

Abstract

The macroeconomic effects of ‘financialisation’ are assessed applying two different variants of a Kaleckian model of distribution and growth. The focus is on the effects of changes in distribution between shareholders/rentiers, firms and workers, as well as on the effects of increasing ‘shareholder value orientation’ of management’s investment decisions. An isolated increase in the ‘shareholder value orientation’ of management’s investment decisions has a uniquely negative effect on capacity utilisation, the profit rate and capital accumulation in both models. An associated rise in the dividend rate, however, has contradicting effects. In both Kaleckian models the ‘normal’ case of a negative effect throughout the endogenous variables, the ‘puzzling’ case of a positive effect throughout, and an ‘intermediate’ case with a positive effect on capacity utilisation and the profit rate and with a negative effect on capital accumulation may arise, depending on the parameter values in the investment and the saving function of the models. ‘Profits without investment’, the ‘intermediate’ case in both models, is a possible medium- or long-run accumulation regime. However, if a rising dividend rate is associated with a particularly strong increase in the mark-up and hence with pronounced redistribution at the expense of labour, the possibility of such a regime will be undermined, provided that unit profits do not have a strong effect on firms’ real investment. The long-run sustainability of such a regime will also be questioned by the adverse effects of low investment on capital stock and productivity growth.

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Bibliographic Info

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 07-2007.

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Length: 35 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:imk:wpaper:07-2007

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Keywords: Financialisation; Distribution; Growth; Kaleckian models;

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References

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Citations

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Cited by:
  1. Thomas I. Palley, 2009. "Inside Debt and Economic Growth: A Cambridge - Kaleckian Analysis," IMK Working Paper 02-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. Loaiza Quintero, O.L., 2011. "La demanda agregada y la distribución del ingreso: Un estudio a partir de los modelos de crecimiento kaleckianos
    [Aggregate Demand and Income Distribution: A Kaleckian Growth Model Approach]
    ," MPRA Paper 42667, University Library of Munich, Germany, revised 01 Apr 2011.
  3. Soon Ryoo & Peter Skott, 2008. "Financialization in Kaleckian Economies with and without Labor Constraints," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 5(2), pages 357-386.
  4. Peter Skott, 2008. "Theoretical and empirical shortcomings of the Kaleckian investment function," UMASS Amherst Economics Working Papers 2008-11, University of Massachusetts Amherst, Department of Economics, revised Dec 2009.
  5. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Springer, vol. 40(2), pages 139-155, July.
  6. Domenica Tropeano, 2011. "Income distribution, growth and financialization: the Italian case," Working Papers 65-2011, Macerata University, Department of Finance and Economic Sciences, revised Apr 2011.
  7. Peter Skott, 2008. "Growth, instability and cycles: Harrodian and Kaleckian models of accumulation and income distribution," UMASS Amherst Economics Working Papers 2008-12, University of Massachusetts Amherst, Department of Economics.
  8. Eckhard Hein, 2008. "Shareholder value orientation, distribution and growth – short- and medium-run effects in a Kaleckian model," Department of Economics Working Papers wuwp120, Vienna University of Economics, Department of Economics.
  9. Till van Treeck, 2008. "The political economy debate on ‘financialisation’ – a macroeconomic perspective," IMK Working Paper 01-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  10. Eckhard Hein, 2009. "A (Post-) Keynesian perspective on "financialisation"," IMK Studies 01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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