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Estimating normal capacity utilization rates and their tolerable ranges of values: A comment on Setterfield

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  • Florian Botte

    (CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Taking the potential instability of the Kaleckian model of growth as his starting point, Setterfield (2017) investigated, inter alia, the possibility of taming the Harrodian instability. His investigation used a range of tolerable values, rather than a unique value, for the normal rate of capacity utilization. After illustrating his point theoretically, Setterfield then proposes empirical methods to estimate the normal capacity utilization rate and the corresponding tolerance range. This paper suggests improved methods to estimate the normal rate of capacity utilization and its tolerance range. The proposed alternative solutions offer better consistency with Post-Keynesian behavioral theories, and the presented exploratory narrative based on these suggestions can partly explain the current stagnation.

Suggested Citation

  • Florian Botte, 2017. "Estimating normal capacity utilization rates and their tolerable ranges of values: A comment on Setterfield," Post-Print hal-01543643, HAL.
    • Handle: RePEc:hal:journl:hal-01543643
    Note: View the original document on HAL open archive server: https://hal.science/hal-01543643
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    References listed on IDEAS

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    8. Steven M. Fazzari & Pietro E. Ferri & Edward G. Greenberg & Anna Maria Variato, 2013. "Aggregate demand, instability, and growth," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 1-21, January.
    9. Peter Skott, 2010. "Growth, Instability and Cycles: Harrodian and Kaleckian Models of Accumulation and Income Distribution," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 5, Edward Elgar Publishing.
    10. 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, Cambridge Political Economy Society, vol. 35(3), pages 587-612.
    11. Mark Setterfield, 2019. "Long-run variation in capacity utilization in the presence of a fixed normal rate," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(2), pages 443-463.
    12. Eckhard Hein & Marc Lavoie & Till van Treeck, 2012. "Harrodian Instability And The ‘Normal Rate’ Of Capacity Utilization In Kaleckian Models Of Distribution And Growth—A Survey," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 139-169, February.
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    Cited by:

    1. Ettore Gallo & Maria Cristina Barbieri Góes, 2023. "Investment, autonomous demand and long-run capacity utilization: an empirical test for the Euro Area," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 225-255, April.
    2. Brian Hartley, 2020. "Corridor stability of the Kaleckian growth model: a Markov-switching approach," Working Papers 2013, New School for Social Research, Department of Economics, revised Nov 2020.
    3. Louis Daumas, 2021. "Should we fear transition risks - A review of the applied literature," Working Papers 2021.05, FAERE - French Association of Environmental and Resource Economists.
    4. Brian Hartley, 2022. "Episodic incidence of Harrodian instability and the Kaleckian growth model: A Markov‐switching approach," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 268-290, February.

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    Keywords

    Normal rate of capacity utilization; Harrodian instability; Kaleckian growth theory;
    All these keywords.

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