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Distribution and Growth: A Dynamic Kaleckian Approach

  • F. Patriarca
  • C. Sardoni

This paper studies the effects of an (exogenous) increase of nominal wages on profits, output, and growth. Inspired by an article by Michal Kalecki (1991), who concentrated on the effects on total profits, the paper develops a model that explicitly considers the dynamics of demand, prices, profits, and investment. The outcomes of the initial wage rise are found to be path dependent and crucially affected by the firms' initial response to an increase in demand and a decrease in profit margins. The present model, which relates to other Post Keynesian/Kaleckian contributions, can offer an alternative to the mainstream approach to analyzing the effects of wage increases.

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File URL: http://www.levyinstitute.org/pubs/wp_697.pdf
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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_697.

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Date of creation: Nov 2011
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Handle: RePEc:lev:wrkpap:wp_697
Contact details of provider: Web page: http://www.levyinstitute.org

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  1. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
  2. Claudio Sardoni, 2011. "Incomes policies: Two approaches," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 8(1), pages 147-163.
  3. repec:cup:cbooks:9780521833875 is not listed on IDEAS
  4. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804, March.
  5. Harcourt, G C & Kenyon, Peter, 1976. "Pricing and the Investment Decision," Kyklos, Wiley Blackwell, vol. 29(3), pages 449-77.
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