Working Paper No 879

repec.nep.his

n?u=RePEc:lev:wrkpap:wp_879&r=his

1 INTRODUCTION

A standard workhorse of modern non-mainstream macroeconomics is what has come to be known

as the Structuralist or the Kaleckian of growth and distribution. A central aspect of the model is

the concept of distribution-led growth. Because of its particular closure—based on a

Keynesian/Kaleckian emphasis on aggregate demand and on an (quasi-)exogenous distribution

determined by institutions and social norms—an exogenous change in distribution does not have a

certain a priori effect on income. An increase in the income share of capitalists may lead to higher

or lower capacity utilization and growth. In the former case the economy is said to be profit led

and in the latter wage led.

The model has been criticized on several fronts; some of the most common of these critiques are

related to its pricing theory, the assumption that saving reacts less than investment to changes in

utilization, and its inability to bring the actual capacity utilization to the level of the desired

capacity even in the long run. 1 A relatively more recent front of criticism is related to the

endogeneity of the distributional shares. If the shares are endogenous, it does not make much

sense to talk about distribution-led growth, which presupposes an exogenous distribution. There

are two variants of the critique. The first one comes from a neo-Keynesian point of view (Skott

and Zipperer 2012; Ryoo 2015; Skott 2016). According to this variant—and along the lines of

Robinson (1956) and Kaldor (1955)—distribution of income is purely endogenous and adjusts to

bring the actual growth rate towards the natural rate of growth. In other words, this critique

originates from a different closure of the macro system. The growth rate, which is endogenous in

the Kaleckian model, is pinned down by the exogenous natural rate and distribution becomes

endogenous to guarantee the adjustment.

1 For critiques along these lines sees Steedman (1992), Skott (2010, 2012), Committeri (1986), Kurz (1986), Auerbach

and Skott (1988), Duménil and Lévy (1999), and Shaikh (2009).

2

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