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Composition of public expenditure, effective demand, distribution and growth

Author

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  • Commendatore, Pasquale
  • Panico, Carlo
  • Pinto, Antonio

Abstract

We introduce public expenditure (PE) in a general post Keynesian framework characterized by a nonlinear investment function. Our aims are: 1) to provide a systematic analysis of the impact of PE (‘productive’ or ‘non productive’) and of the Government sector size on economic growth, allowing effective demand to play a crucial role. Our work fills a lacuna in the post Keynesian literature given that scant attention has been devoted to this topic. In our paper, ‘Productive’ PE affects the (fixed) coefficients of production similarly to Barro (1990); 2) to compare and contrast two different interpretations which assign a different meaning to the autonomous component of the investment function, corresponding to long run demand growth expectations: the Kaleckian interpretation assumes exogenous long run expectations; in the Classical or Harrodian interpretation, long-run expectations are linked to the ‘warranted rate of growth’; 3) to reproduce a variety of complex phenomena (multiple equilibria, hysteresis, low growth traps, regular and irregular growth cycles), by introducing a simple nonlinearity in the investment function in the spirit of Kalecki’s (1937) investment theory and Kaldor’s (1940) trade cycle model. A plethora of results emerge from our simple framework concerning comparative statics and dynamicbehaviour.

Suggested Citation

  • Commendatore, Pasquale & Panico, Carlo & Pinto, Antonio, 2007. "Composition of public expenditure, effective demand, distribution and growth," MPRA Paper 9085, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9085
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    File URL: https://mpra.ub.uni-muenchen.de/9085/1/MPRA_paper_9085.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    3. Giorgio Rodano & Gian Italo Bischi & Enrico Saltari & Roberto Dieci, 2001. "Multiple attractors and global bifurcations in a Kaldor-type business cycle model," Journal of Evolutionary Economics, Springer, vol. 11(5), pages 527-554.
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    Cited by:

    1. Pasquale Commendatore & Carlo Panico & Antonio Pinto, 2010. "Government Spending, Effective Demand, Distribution and Growth: A Dynamic Analysis," Chapters,in: Institutional and Social Dynamics of Growth and Distribution, chapter 6 Edward Elgar Publishing.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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