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Growth with Unused Capacity and Endogenous Depreciation

  • Fabrizio Patriarca
  • Claudio Sardoni

This paper contributes to the debate on income growth and distribution from a nonmainstream perspective. It looks, in particular, at the role that the degree of capacity utilization plays in the process of growth of an economy that is not perfectly competitive. The distinctive feature of the model presented in the paper is the hypothesis that the rate of capital depreciation is an increasing function of the degree of capacity utilization. This hypothesis implies analytical results that differ somewhat from those yielded by other Kaleckian models. Our model shows that, in a number of cases, the process of growth can be profit-led rather than wage-led. The model also determines the value to which the degree of capacity utilization converges in the long run.

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File URL: http://www.levyinstitute.org/pubs/wp_795.pdf
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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_795.

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Date of creation: Apr 2014
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Handle: RePEc:lev:wrkpap:wp_795
Contact details of provider: Web page: http://www.levyinstitute.org

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  1. Patriarca, Fabrizio, 2012. "Time-to-build, obsolescence and the technological paradox," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 1-10.
  2. Eleni Angelopoulou & Sarantis Kalyvitis, 2012. "Estimating the Euler Equation for Aggregate Investment with Endogenous Capital Depreciation," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 1057-1078, January.
  3. Michalis Nikiforos, 2013. "The (Normal) Rate of Capacity Utilization at the Firm Level," Metroeconomica, Wiley Blackwell, vol. 64(3), pages 513-538, 07.
  4. Peter Skott, 2010. "Growth, Instability and Cycles: Harrodian and Kaleckian Models of Accumulation and Income Distribution," Chapters, in: Handbook of Alternative Theories of Economic Growth, chapter 5 Edward Elgar.
  5. Lavoie, Marc, 1995. "The Kaleckian Model of Growth and Distribution and Its Neo-Ricardian and Neo-Marxian Critiques," Cambridge Journal of Economics, Oxford University Press, vol. 19(6), pages 789-818, December.
  6. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  7. Eckhard Hein & Marc Lavoie & Till van Treeck, 2011. "Some instability puzzles in Kaleckian models of growth and distribution: a critical survey," Cambridge Journal of Economics, Oxford University Press, vol. 35(3), pages 587-612.
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