Supply and demand in Kaldorian growth models: a proposal for dynamic adjustment
Magacho, Guilherme and Spinola, Danilo (2022) Supply and demand in Kaldorian growth models: a proposal for dynamic adjustment. Review of Political Economy. ISSN 0953-8259
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Abstract
This paper analyses the dynamic adjustment of supply and demand in Kaldorian growth models. We discuss how the growth rate of a country, given by demand constraints, adjusts towards the growth rate given by the supply-side, and vice-versa, presenting the necessary conditions and empirical plausibility for these adjustments. The Palley-Setterfield approach brings a possible reconciliation to supply- and demand- long-term growth rates. However, this approach have some important empirical drawbacks, and we raise many considerations about the labour market in order to capture their analysis in a common framework. In this sense, we draw from the criticism developed by McCombie, and synthetize his view in terms of complete endogeneity, in a way in which employment adjusts immediately to guarantee equilibrium between supply and demand. The main contribution of the paper is to propose a theoretical reconciliation between the Palley-Setterfield and the McCombie approaches, presenting an initially simple model focused in a labour market adjustment, in which both types of adjustments represent extreme cases. We also discuss the theoretical possibility and the characteristics of hysteresis effects that lead to intermediate cases.
| Item Type: | Article | ||||||
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| Identification Number: | https://doi.org/10.1080/09538259.2022.2139597 | ||||||
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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 Applied 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: | 02 Nov 2022 09:30 | ||||||
| Last Modified: | 22 Mar 2023 11:48 | ||||||
| URI: | https://www.open-access.bcu.ac.uk/id/eprint/13688 |
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