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Markup rates, competition and the over-determination problem in a two-sector neo-Kaleckian model

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  • Biao Huang

Abstract

As an important alternative to the neo-classical theory, the neo-Kaleckian theory has been widely generalized. Among these generalizations, Dutt and others generalized a one-sector neo-Kaleckian model into a two-sector model. Park criticized Dutt’s model for suffering an over-determination problem after integrating sectoral investment functions. This paper argues that the over-determination problem is not caused by the incompatibility of sectors’ investment functions and equalized rates of profit, but rather the incompatibility of profit rate equalization and the arbitrarily given markup rates of different sectors. If the relative markup ratio becomes endogenous, then the two-sector model is perfectly determined and is more logically consistent. Finally, this paper also discusses the adjustment mechanism from the short-period to the long-period equilibrium, and shows that the latter is locally stable.

Suggested Citation

  • Biao Huang, 2026. "Markup rates, competition and the over-determination problem in a two-sector neo-Kaleckian model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 49(1), pages 165-182, January.
    • Handle: RePEc:mes:postke:v:49:y:2026:i:1:p:165-182
    DOI: 10.1080/01603477.2025.2550974
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