Supply and demand in Kaldorian growth models: a proposal for dynamic adjustment
Magacho, Guilherme and Spinola, Danilo (2021) Supply and demand in Kaldorian growth models: a proposal for dynamic adjustment. Working Paper 10. Centre for Applied Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University, Birmingham. (Submitted)
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20210124_Magacho_Spinola_CAFE_WP10_Supply and demand in Kaldorian growth models - a proposal for dynamic adjustment - Copy.pdf - Submitted Version Download (555kB) |
Abstract
This paper analyses the dynamic adjustment of supply and demand in Kaldorian growth models. We aim at discussing how the growth rate of a country, given by demand constraints, adjust towards the growth rate given by the supply-side, and vice-versa, presenting the necessary conditions for those adjustments. Our main conclusion is that if there are no capital constraints, firms invest to maintain a constant desired level of capital utilization. Depending on specific conditions, however, an economy may face labour constraints, which would require an adjustment mechanism on employment. The Palley-Setterfield approach brings a possible reconciliation to supply- and demand- long-term growth rates. However, we must raise some considerations about the labour market in order to understand the characteristics of this approach. We draw from the critique by McCombie, in which employment adjusts immediately to guarantee equilibrium between supply and demand. We propose reconciliation between the Palley-Setterfield and the McCombie approaches, presenting a model focused in a labour market adjustment, in which both types of adjustments represent extreme cases, discussing the existence and the characteristics of intermediate cases.
| Item Type: | Monograph (Working Paper) | ||||
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| Identification Number: | 10 | ||||
| Dates: |
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| Uncontrolled Keywords: | economic adjustment, demand-led growth, natural rate of growth, Kaldorian growth models | ||||
| Subjects: | CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics | ||||
| Divisions: | Faculty of Business, Law and Social Sciences > Birmingham City Business School > Centre for Accountancy Finance and Economics Faculty of Business, Law and Social Sciences > Birmingham City Business School |
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| Depositing User: | Danilo Sartorello Spinola | ||||
| Date Deposited: | 25 Jan 2021 10:33 | ||||
| Last Modified: | 22 Mar 2023 11:48 | ||||
| URI: | https://www.open-access.bcu.ac.uk/id/eprint/10787 |
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