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Demand Drives Growth all the Way

Taylor, Lance and Foley, Duncan K. and Rezai, Armon (2018) Demand Drives Growth all the Way. Ecological Economic Papers, 20. WU Vienna University of Economics and Business, Vienna.

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Abstract

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.

Item Type: Paper
Divisions: Departments > Sozioökonomie > Ecological Economics
Depositing User: Daniel Schmelz
Date Deposited: 27 Mar 2019 14:45
Last Modified: 27 Mar 2019 14:45
URI: http://epub.wu.ac.at/id/eprint/6891

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