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Does the Steindl-Dutt Investment Function Rule Out Profit-Led Expansion?

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  • Deepankar Basu

    () (Department of Economics, University of Massachusetts - Amherst)

Abstract

Bhaduri and Marglin (1990) had argued that an investment function which has the profit rate and the capacity utilization rates as the two determinants of investment imposes unwarranted restrictions on the macroeconomic model and rules out profit-led expansion. In this paper, I show that this critique only holds in a closed economy model. In an open economy model, such an investment function does not rule out profit-led expansion. I argue that the problem was less in the investment function itself than in the larger model within which it was embedded, in particular the saving behavior of the macroeconomy entailed by the model.

Suggested Citation

  • Deepankar Basu, 2018. "Does the Steindl-Dutt Investment Function Rule Out Profit-Led Expansion?," UMASS Amherst Economics Working Papers 2018-06, University of Massachusetts Amherst, Department of Economics.
  • Handle: RePEc:ums:papers:2018-06
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    File URL: http://www.umass.edu/economics/publications/2018-06.pdf
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    References listed on IDEAS

    as
    1. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
    2. repec:elg:rokejn:v:5:y:2017:i:3:p336-359 is not listed on IDEAS
    3. 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 375-393, December.
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    More about this item

    Keywords

    structuralist model; investment function; profit-led expansion;

    JEL classification:

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

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