11 Summary and Conclusion
| Variable\Model | Classical-Marxian | Neo-Keynesian | Kalecki-Steindl |
Neo-Kaleckian | Distributional Conflict | Kaldorian Export-led Growth |
|---|---|---|---|---|---|---|
| Assumptions\Main characteristics | - Leontief production function - Capital limits maximum output (max Y is Y_K - only one good - No government - No foreign trade - Only capitalists and workers - Supply-led growth |
- Distinction between savings and investment - Labor limits maximum output, not capital - Growth is demand-led - Only one good - No foreign trade - Only capitalist and workers - nominal wage fixed\exogenous |
- Distinction between savings and investment - Labor limits maximum output, not capital - Growth is demand-led - Only one good - No foreign trade - Only capitalist and workers |
- Positive savings out of wages - Different specification of investment function - Demand can also be profit-led, depends on the sensitivity of investment from the profit share - Open-economy |
Introduction of class conflict between workers and capitalist over the distribution of national income Wage-led and profit-led demand regime introduce the effects of utilization on distribution Two different hyptheses on distribution and output adjustment speed: 1. Output adjusts more rapidly than distribution (nominal wage and price) 2. Output and distribution have the same adjustment speed |
Growth is demand-led Demand is driven by exports Positive association between output and productivity growth Important role of the size of the manufacturing sector Most productivity gains come from manufactures Export-led cumulative causation growth |
| Technology | No technological change or exogenous Hicks, Harrod and Solow neutral technological change increase profit rate, growth rate and real wage all at once Marx biased technological change leads to falling rate of profit under fixed wage share closure |
- Exogenous | - Exogenous | Exogenous | Labor productivity growth reduces the wage share if not followed by increase in nominal wage. Hence, when labor productivity increases, workers try to bargain for higher nominal wage |
|
| Capacity rate of utilization | Fixed at full level (u = 1) | Constant | Flexible and always below one because: 1. Bulding ahead of demand 2. Entry deterrence 3. Indivisibilities |
Flexible and always below one because: 1. Bulding ahead of demand 2. Entry deterrence 3. Indivisibilities |
Flexible and always below one because: 1. Bulding ahead of demand 2. Entry deterrence 3. Indivisibilities Wage-led demand: positively influenced by wage share profit-led demand: negatively influenced by wage share Wage-squeeze: utilization rate has a negative impact on the wage share Profit-squeeze: utilization rate has a positive impact on the wage share |
|
| Output growth | Increase with: - More savings - Lower real wage and higher profit rate - Technological change |
Increase with: - Higher growth and profit rate expectations - Confidence in the economy - Higher investment, but not necessarily with higher savings Excess savings can depress growth |
Increase with: - lower markup rate - higher wage share and real wage - Driven by private consumption ==> wage-led demand regime |
Demand-led, but demand regime either: Wage-led: - when saving propensity out of wages is relatively low - Sensibility of investments from profit share is low - Foreign trade is not important, domestic economy weakly connected to international trade Profit-led: - When saving propensity out of wage is relatively high - Sensibility of investments from profit share is high - Domestic economy is strongly connected to international trade |
Wage-led demand: positively influenced by wage share profit-led demand: negatively influenced by wage share Wage-squeeze: utilization rate has a negative impact on the wage share Profit-squeeze: utilization rate has a positive impact on the wage share |
|
| Inequality (wage and profit shares) |
Increasing inequality allows for more rapid growth Wage share constant under closure 2 (fixed wage share through bargaining process) |
Increasing inequality allows for more rapid growth: more investment leads to inflation and depress real wage, but increase output |
Less inequality leads to higher rate of growth | Wage-led: - Lower inequality increases growth Profit-led: - Greater inequality increases growth |
Wage share and profit share depend on target wage share for firms and workers, which in return depend on institutional factors which favor either capitalists or workers |
|
| Real Wage |
With technology constant, inverse relationship with profit rate Exogenous under closure 1 (fixed real wage) and determined by historical and social norms defining a minimum standard of living for workers |
Nominal wage fixed, adjustment in real wage through inflation and deflation Since inflation is always demand-driven, excess investment reduces real wage |
Increase with decreasing markup, positive impact on growth |
Wage-led: - Higher real wage boosts demand and growth Profit-led: -Higher real wage depress growth |
||
| Profit Rate | With technology constant, inverse relationship with real wage | Higher profit rate expectation necessary for more rapid growth |
Inverse relationship with profit share, positive with markup | Wage-led: - Higher profit rate depress growth Profit-led: - Higher profit rate boost growth |
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| Savings and Investment | No distinction between savings and investment Savings only out of profits, workers do not save |
Clear distinction Savings only out of profits (except in early kaldorian model) Investment drives growth Excess savings can depress growth through reduction in aggregate demand |
Clear distinction | Clear distinction | Clear distinction | |
| Inflation | Demand-driven? |
Always demand-driven, inflation is the result of excess demand from investment in the market for goods and services |
Markup pricing Introduction of supply led inflation |
Markup pricing Inflation can be supply-led through increase in costs |
Markup Pricing | |