Working Paper No 879



If we focus on one of these factors (say j = k), then ceteris paribus we have:

du/dx k = D ′ (x k ) = (gi π−g s π)π xk +g i γγ xk

g s u−g i u


Assuming again the Keynesian stability condition, we can see how the effect of a change in x j

depends not only on the propensities of investment and saving out of profits, the term g i π − g s π

(which also appeared in the model of section 3), but also on the secondary effect, which is

captured by the term g i γγ xk . This term has obvious effects on the magnitude of distributional

changes on demand, and in certain cases, if it is big enough, it can even change its overall sign.

More precisely, the overall effect will be in the opposite direction of the one predicted by the

propensities if g i γγ xk > (g i π − g s π)π xk , if the effect through the secondary channel (g i γγ xk ) is in the

opposite direction and large enough to counteract the effect through the propensities

((g i π − g s π)π xk ).

Therefore, we should not talk about π-led growth (distribution-led growth), but rather x j -led

growth (institutional-factor-specific-led growth).

6.2 A Methodological Discussion

The points raised by Skott are interesting and require some further reflection. First of all, it is

worth mentioning that this point of view is diametrically opposed to the neo-Keynesian/

“Kaldorian” approach, which Skott usually advocates. From a Kaldorian point of view, the

Kaleckian model is wrong and the concept of distribution-led growth is misguided because

distribution is purely endogenous and it is completely determined by economic factors within the

model; institutional factors and social norms play no role. On the other hand, the “shock

dependent effects” critique outlined in the previous section accepts the classical closure and

doubles down on it. The critique now originates from a lower level of abstraction. Essentially,


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