Demand Drives Growth all the Way

• Main Authors: Taylor, Lance, Foley, Duncan K., Rezai, Armon
• Format: Others
• Language: en
• Published: WU Vienna University of Economics and Business 2018
• Online Access: http://epub.wu.ac.at/6891/1/WP_20.pdf

A demand-driven alternative to the conventional Solow-Swan growth model is analyzed. Its medium run is built around Marx-Goodwin cycles of demand and distribution. Long-run income and wealth distributions follow rules of accumulation stated by Pasinetti in combination with a technical progress function for labor productivity growth incorporating a Kaldor effect and induced innovation. An explicit steady state solution is presented along with analysis of dynamics. When wage income of capitalist households is introduced, the Samuelson-Modigliani steady state "dual" to Pasinetti's cannot be stable. Numerical simulation loosely based on US data suggests that the long-run growth rate is around two percent per year and that the capitalist share of wealth may rise from about forty to seventy percent due to positive medium-term feedback of higher wealth inequality into its own growth. === Series: Ecological Economic Papers