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The Italian economic decline in a Kaldorian theoretical perspective

Author

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  • Guglielmo Forges Davanzati

    () (University of Salento (IT))

  • Rosario Patalano
  • Guido Traficante

Abstract

This paper analyses the Italian economic decline in a Kaldorian theoretical framework. On the theoretical ground we propose an interpretation of the Italian economic decline based on the continuous decline of domestic demand and the constant reduction of the rate of growth of labour productivity. This interpretation is consistent with the concept of decline, which involves a long-run perspective. We also consider the role of the banking sector as a factor driving aggregate demand and, in turn, labour productivity. We estimate a VAR for the period 2002-2015 to analyse jointly the evolution of public consumption, real GDP, private investments, credit supply, labour compensation and productivity. Our main empirical finding is that aggregate demand and credit supply significantly affect the path of labour productivity, consistently with Kaldor's second law.

Suggested Citation

  • Guglielmo Forges Davanzati & Rosario Patalano & Guido Traficante, 2016. "The Italian economic decline in a Kaldorian theoretical perspective," Working Papers PKWP1606, Post Keynesian Economics Society (PKES).
  • Handle: RePEc:pke:wpaper:pkwp1606
    as

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    File URL: http://www.postkeynesian.net/downloads/working-papers/PKWP1606_gB58IUN.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
    1. Coad, Alex & Rao, Rekha & Tamagni, Federico, 2011. "Growth processes of Italian manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 22(1), pages 54-70, February.
    2. Toniolo, Gianni (ed.), 2013. "The Oxford Handbook of the Italian Economy Since Unification," OUP Catalogue, Oxford University Press, number 9780199936694.
    3. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters,in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122 National Bureau of Economic Research, Inc.
    4. Stockhammer, Engelbert & Ramskogler, Paul, 2007. "Uncertainty and exploitation in history," Department of Economics Working Paper Series 82, WU Vienna University of Economics and Business.
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    Cited by:

    1. Matteo Deleidi & Walter Paternesi Meloni & Antonella Stirati, 2018. "Structural change, labour productivity and the Kaldor-Verdoorn law: evidence from European countries," Departmental Working Papers of Economics - University 'Roma Tre' 0239, Department of Economics - University Roma Tre.
    2. Jan Kodera & Quang Van Tran, 2016. "Odhad parametrů rozšířeného Kaldorova modelu a analýza stability stacionárního řešení
      [An Inflation Analysis Using an Endogenous Business Cycle Model]
      ," Politická ekonomie, University of Economics, Prague, vol. 2016(7), pages 769-788.

    More about this item

    Keywords

    Kaldor; Italy; aggregate demand; labour productivity;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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