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Demand Drives Growth All The Way

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This paper makes three contributions to the existing literature on economic growth: first, we provide a demand-driven alternative to the conventional supply side Solow-Swan growth model. The model’s medium run is built around MarxGoodwin cycles of demand and distribution. Second, we introduce wage income of “capitalist” households. The Samuelson-Modigliani steady state “dual” to Pasinetti’s cannot be stable when capitalists have positive wages. Finally, we speak to the discussion triggered by Piketty on the stability of wealth concentration and its relation to the profitability of capital. Our demand-driven model of the long run satisfies Kaldor’s stylized facts (the gold standard of growth theory) and generates sustained economic growth with the capitalists’ share of wealth stabilizing between zero and one. Complications arising from “excess” capital gains and how well the model fits the data are briefly considered.

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  • Lance Taylor & Duncan K Foley & Armon Rezai & Luiza Pires & Ozlem Omer & Ellis Scharfenaker, 2016. "Demand Drives Growth All The Way," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2016-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  • Handle: RePEc:epa:cepawp:2016-04
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    Cited by:

    1. Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.
    2. repec:wfo:wstudy:61256 is not listed on IDEAS
    3. Rezai, Armon & Taylor, Lance & Foley, Duncan, 2018. "Economic Growth, Income Distribution, and Climate Change," Ecological Economics, Elsevier, vol. 146(C), pages 164-172.
    4. repec:wfo:monber:y:2018:i:12:p:855-862 is not listed on IDEAS

    More about this item

    Keywords

    Demand; Growth; Keynes;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian

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