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Keynes's multiplier in a two-sectoral framework

Listed author(s):
  • Jochen Hartwig

This paper endeavours to reinterpret one of the most fundamental concepts of macroeconomics: the Keynesian investment multiplier. The multiplier is not interpreted as a dynamic process (or quantity reaction of output) nor as a logical relation (or ratio) between income and investment expenditure, but as an equilibrium condition that prescribes the proportionality between the two 'departments' of the economy (the consumption-goods and the investment-goods sector) necessary for 'completely successful reproduction'. The Marxian concept of reproduction schemes is combined with Keynes's 'fundamental psychological law' (which states that the marginal propensity to consume is positive and less than unity) to derive this result. This 'structural' view of the multiplier is then used to analyse questions relating to economic growth, capital accumulation and structural change.

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Article provided by Taylor & Francis Journals in its journal Review of Political Economy.

Volume (Year): 16 (2004)
Issue (Month): 3 ()
Pages: 309-334

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Handle: RePEc:taf:revpoe:v:16:y:2004:i:3:p:309-334
DOI: 10.1080/0953825042000225616
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References listed on IDEAS
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  1. Claude Gnos & Louis-Philippe Rochon, 2008. "The Keynesian Multiplier," Post-Print halshs-00314304, HAL.
  2. Lianos, Theodore P., 1979. "Domar's growth model and Marx's reproduction scheme," Journal of Macroeconomics, Elsevier, vol. 1(4), pages 405-412.
  3. Pasinetti,Luigi, 1993. "Structural Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521432825, March.
  4. L. Randall Wray, 1999. "Theories of Value and the Monetary Theory of Production," Economics Working Paper Archive wp_261, Levy Economics Institute.
  5. Louis-Philippe Rochon, 1999. "Credit, Money and Production," Books, Edward Elgar Publishing, number 1565.
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