The Dynamics of Policy Innovation and Paradigmatic Change
Edited by Hideko Magara
Chapter 5: Varieties of economic growth regimes, types of macroeconomic policies and policy regimes: a post-Keynesian analysis
This chapter investigates the relationship between economic policy and macroeconomic performance. The purpose of the chapter is to contribute to current research on the policy regime from the viewpoint of post-Keynesian economics. The mechanisms of growth and business cycles have been revealed by post-Keynesian economics based on income distribution and finance. It has been almost fully shown that there are two types of growth and demand regimes, wage-led (stagnationist) and profit-led (exhilarationist). A wage-led growth regime (WLG) indicates an economy in which a rise in the profit share (a fall in the wage share) leads to a decrease in the rate of output growth, and a profit-led growth (PLG) regime indicates an economy in which a rise in the profit share leads to an increase in the rate of output growth. Representative theoretical analyses include Bhaduri and Marglin (1990), Blecker (2002) and Dutt (2012). Moreover, recent empirical studies include Stockhammer and Onaran (2004), Nishi (2011) and Storm and Naastepad (2012), which show that the income distribution- growth regime differs across countries and periods. Post-Keynesians have also examined macroeconomic performance in terms of the link between firm or government debt accumulation and economic growth. When increases in the debt-capital ratio and the interest rate lead to an increase in the rate of output growth, the economy is said to have a debt-led growth (DLG) regime.
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