Distribution and Growth after Keynes

Distribution and Growth after Keynes

A Post-Keynesian Guide

Eckhard Hein

In the first part of the book, Eckhard Hein presents a comprehensive overview of the main approaches towards distribution and growth including the contributions of Harrod and Domar, old and new neoclassical theories including the fundamental capital controversy critique, the post-Keynesian contributions of Kaldor, Pasinetti, Thirlwall and Robinson, and finally the approaches by Kalecki and Steindl. In the second part of the book neo- and post-Kaleckian models are gradually developed, introducing saving from wages, international trade, technological progress, interest and credit. Issues of ‘financialisation’ are also explored and empirical results related to the different models are presented.

Chapter 6: The basic Kaleckian distribution and growth models

Eckhard Hein

Subjects: economics and finance, history of economic thought, post-keynesian economics


In this chapter we will develop two versions of a basic Kaleckian distribution and growth model, which will only differ with respect to their investment functions. These models provide the foundations for further extensions in the following chapters of the book, providing models which have been applied in empirical research by several authors. As in the previous chapters, we will make use of equilibrium modelling methods and generate equilibrium growth paths or long-run steady states. This might be considered to contradict Kalecki’s attempts at providing dynamic models of the trade cycle and of cyclical growth. However, as pointed out by Dutt (2011a), this method does not imply that the generated equilibria should be considered as actual states of rest or of tranquillity of the real economy. Steady state growth equilibria are rather theoretical tools of analysis, which are generated by the model holding several parameters and coefficients constant, which may and will change in the real world. Changes in these parameters and coefficients can then be integrated, and the model thus provides the tools to analyse these changes in a systematic way, either by means of treating these changes as exogenous shocks or by means of endogenizing them in a dynamic disequilibrium modelling approach.

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