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A post-Keynesian model of growth and distribution with a constraint on investment

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  • Commendatore, Pasquale
  • Pinto, Antonio
  • Sushko, Iryna

Abstract

We introduce in a post-Keynesian/Kaleckian model of growth and distribution a constraint on firms’ investment induced by increasing adjustment costs and/or limited financial resources. Whereas in the short run limiting firms’ investment reduces capacity utilization and capital accumulation, in the long run, allowing the adjustment of the “normal” to the actual degree of capacity utilization, the direction of the impact of the constraint goes in the opposite direction: relaxing the constraint reduces capital utilization and accumulation. Moreover, an increase in the saving propensity or a fall in wages do not always cause a reduction in the degree of capital utilization – the so-called paradoxes of thrift and costs – as predicted by the standard post-Keynesian/Kaleckian analysis; and growth could be profit led. These results are not confined to long-run positions of the economy characterized by convergence to a stationary equilibrium but take also into account periodic or chaotic fluctuations.

Suggested Citation

  • Commendatore, Pasquale & Pinto, Antonio & Sushko, Iryna, 2014. "A post-Keynesian model of growth and distribution with a constraint on investment," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 12-24.
    • Handle: RePEc:eee:streco:v:28:y:2014:i:c:p:12-24
    DOI: 10.1016/j.strueco.2013.09.001
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    1. Alin OPREANA, 2015. "A New Perspective of Investment Modelling at the European Union Level," Expert Journal of Economics, Sprint Investify, vol. 3(2), pages 143-148.

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    More about this item

    Keywords

    Post-Keynesian growth and distribution model; Constrained investment function; Stability; Complex dynamics;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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