In a recent post Matias Vernengo, this causality is exhibiting the theoretical and empirical problems faced by the explanations of earnings-led growth that has taken much of the progressive left to explain economic growth in capitalist economies.
In these versions appear to be disregarded in such economies do not tend to full employment of resources, and therefore the product responds to changes in its main limitation: the demand externalities (public expenditure, exports, autonomous consumption, housing construction, R & D credits consumption). The latter has a central importance to accelerate investment (induced demand) in a way that preserves the relationship of degree of capacity utilization stable. The investment is induced or pro-cyclical.
It is the highest rate of profit which means more investment, if there is no overall increase in demand independently. Conversely, you can grow best or worst income distribution
if autonomous demand grows, as shown in the figure.
The global figure shows that the correlation between distribution and growth is almost nil (-0083), where the abscissae axis defines the wage share in income, while the vertical axis rate per capita GDP growth between 1960 and 2000. You can be the source and make your own graph with the plot: David Weil of Economic Growth: data plotter here
Go Vernengo good post:
More information on income distribution and growth (Wonskish, as Krugman would say)
few years ago, Sam Bowles presented a document (Kudunomics: Property rights for the information-based economy) at the University of Utah. At dinner reaffirmed its conviction that the overall balance of Arrow-Debreu (GE) is compatible with different types of behavior and can be a force for progressive economics. Conventional marginalist theory suggests that income distribution is the result of relative scarcity, and consequently, real wages must equal the marginal product of labor, labor productivity, ie. When asked how he framed GE belief in the fact that wages in the U.S. are no productivity from the 1970, Bowles looked puzzled. And the relationship between income distribution and growth is still disconcerting to the mainstream and their flatterers.
maverick in the field, the discussion has focused mostly among the models called Kaleckian and Kaldoriano. First, I must point out that, from a point in the history of ideas, the name is a misnomer Kaleckian. Kalecki models, where the interaction of multiplier and accelerator, with shocks and setbacks, resulting in fluctuations. In the various forms of the equation accelerator Kalecki included a trend, producing fluctuations around a trend. The so-called Kaleckians models derived from Harrod and Joan Robinson attempts to extend the principle of effective demand in the long run Keynes (PED).
The DEP says that increased investment is precisely correlated with an increase in savings, and the level of income is the main adjustment variable (rather than the interest rate on loanable funds theory) . Kaleckians models essentially normalize the savings-investment identity capital stock, assuming (in the extreme case) that the propensity to save of wages is zero, and a propensity to save of profit (s) is between zero and one, and key Keynesian investment determines savings. The difference in the short term is that now the accumulation (investment / capital) determines the distribution of income (profit rate), a result often referred to as the equation of Cambridge.
The various embodiments of Kaleckian models are defined by how you specify the investment function. For example, in the influential paper by Bhaduri and Marglin (BM) (subscription required) argue that investment and saving are functions of the rate of profit (h) and capacity utilization (z). In other words:
I (h, z) = SHZ
Solving
z drifting with respect to h we have:
dz / dh = (Ih - sz) / (sh - Iz) Where
Ih is the response of investment to profitability and Iz response to capacity utilization . Assuming stability, ie, that responds to the cost savings rather than investment to capacity utilization, will have the denominator is positive, so that the sign of the equation depends on the numerator. If the investment is very sensitive to the profitability (Ih-sz> 0), then the system is led by gains (in terms exhilarationist BM). If not, we will wage-led regime (stagnationist).
I (h, z) = z SHZ
Solving deriving with respect to h we have:
dz / dh = (Ih - sz) / (sh - Iz)
As I suggested in my post previous There are some theoretical problems with the type of model used to argue that the U.S. economy is driven by profits, as well as empirical problems alluded to earlier. Independent investment function suggests that capacity utilization affects the formation of capital, if the capacity is low there is more investment, and vice versa when z is high. In other words, companies try to align capacity with demand. If that is the case, You can expect a normal relationship between capacity and demand is established in the long term (in the neoclassical view suits claim the ability, which is Say's Law), which could be seen as relatively stable capital-output throughout the period of the U.S., in my previous post.
If that is the case, investment is determined by adjusting the exogenous demand capacity to reach the normal capacity utilization, and is essentially derived from the demand. No investment has a critical role in determining the normal level of capacity utilization, which should be determined by the exogenous components demand. This is the basis for more abound models developed by Hicks, and then by Nicholas Kaldor, and referred to as heterodox Kaldoriana in the literature (for more on this see this article ).
That is the essential difference between models and Kaldorianos Kaleckians, if the investment is partially autonomous and determined by the profitability or demand arises. Distribution of income in the models course Kaldorianos could have ambiguous effects on growth, but most companies will not invest because earnings grow only if there is no increase in demand. In this sense, the worsening income distribution could lead to higher growth if demand continues, for some reason (for example private debt stimulate consumption, or encourage the consumption of a higher income group). But overall growth led by gains to encourage investment, and within the framework MB seems to be difficult to explain from a theoretical point of view. And so, the confusion generated empirically (for example, in the case of the U.S. with the notion that a rise of debt-induced consumption-led growth belongs to earnings).
PS: The typical Kaldor model is based on the work Thirlwall, but also in the book of Bortis and the Serrano thesis (or paper , subscription required) are essential reading. In English you can see Serrano & Freitas at Circus 1.
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