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On the Utilization Controversy: A Theoretical and Empirical Discussion of the Kaleckian Model of Growth and Distribution

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  • Michalis Nikiforos

Abstract

This paper examines the "utilization controversy" around the Kaleckian model of growth and distribution. We show that the Federal Reserve data on capacity utilization, which have been used by both sides of this debate, are the wrong kind of data for the issue under examination. Instead, a more appropriate measurement can be derived from the data on the Average Workweek of Capital. We argue that the long-run dynamic adjustment proposed by Kaleckian scholars lacks a coherent economic rationale, and provide an alternative path toward the endogeneity of the desired utilization at the micro and macro levels. Finally, we examine the proposed adjustment mechanism econometrically. Our results verify the endogeneity of the normal utilization rate.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_739.

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Date of creation: Nov 2012
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Handle: RePEc:lev:wrkpap:wp_739

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Related research

Keywords: Kaleckian; Long Run; Economies of Scale; Utilization;

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  1. Eckhard Hein & Marc Lavoie & Till van Treeck, 2012. "Harrodian Instability And The ‘Normal Rate’ Of Capacity Utilization In Kaleckian Models Of Distribution And Growth—A Survey," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 139-169, 02.
  2. Catherine J. Morrison, 1985. "On the Economic Interpretation and Measurement of Optimal Capacity Utilization with Anticipatory Expectations," NBER Working Papers 1536, National Bureau of Economic Research, Inc.
  3. Betancourt,Roger R. & Clague,Christopher K., 2008. "Capital Utilization," Cambridge Books, Cambridge University Press, number 9780521070287, April.
  4. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
  5. Lavoie, Marc, 1995. "The Kaleckian Model of Growth and Distribution and Its Neo-Ricardian and Neo-Marxian Critiques," Cambridge Journal of Economics, Oxford University Press, vol. 19(6), pages 789-818, December.
  6. Michalis Nikiforos, 2012. "The (Normal) Rate of Capacity Utilization at the Firm Level," Economics Working Paper Archive wp_737, Levy Economics Institute.
  7. Bonleu, A. & Cette, G. & Horny, G., 2011. "Capital Utilisation and Retirement," Working papers 343, Banque de France.
  8. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
  9. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
  10. Anwar Shaikh, 2009. "Economic Policy In A Growth Context: A Classical Synthesis Of Keynes And Harrod," Metroeconomica, Wiley Blackwell, vol. 60(3), pages 455-494, 07.
  11. Norman Morin & John Stevens, 2004. "Estimating capacity utilization from survey data," Finance and Economics Discussion Series 2004-49, Board of Governors of the Federal Reserve System (U.S.).
  12. Matthew D. Shapiro, 1986. "Capital Utilization and Capital Accumulation: Theory and Evidence," NBER Working Papers 1900, National Bureau of Economic Research, Inc.
  13. Michalis Nikiforos & Duncan K. Foley, 2012. "Distribution And Capacity Utilization: Conceptual Issues And Empirical Evidence," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 200-229, 02.
  14. Marc Lavoie & Gabriel Rodriguez & Mario Seccareccia, 2004. "Similitudes and Discrepancies in Post-Keynesian and Marxist Theories of Investment: A Theoretical and Empirical Investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 127-149.
  15. Winston, Gordon C, 1974. "The Theory of Capital Utilization and Idleness," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1301-20, December.
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