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Putting Austerity to Bed: Technical Progress, Aggregate Demand and the Supermultiplier

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  • Matteo Deleidi
  • Mariana Mazzucato

Abstract

The paper investigates the determinants of private investment and economic growth from a theoretical perspective. We start with a critical analysis of the crowding-out effect and we present a new version of the Sraffian Supermultiplier: a model that accounts for both the multiplier and accelerator effects. We focus on different types of fiscal policies: generic ones and ‘mission-oriented’ ones that set a new direction for the economy. We show that mission-oriented policies have the potential to generate the largest positive effect on investments and output growth as well as on innovation processes and labour productivity growth.

Suggested Citation

  • Matteo Deleidi & Mariana Mazzucato, 2019. "Putting Austerity to Bed: Technical Progress, Aggregate Demand and the Supermultiplier," Review of Political Economy, Taylor & Francis Journals, vol. 31(3), pages 315-335, July.
    • Handle: RePEc:taf:revpoe:v:31:y:2019:i:3:p:315-335
    DOI: 10.1080/09538259.2019.1687146
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