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Aggregate Demand and Endogenous Growth: a Generalized Keynes‐Kaldor Model of Economic Growth
Author(s) -
Palley Thomas I.
Publication year - 1997
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.00025
Subject(s) - economics , aggregate demand , endogenous growth theory , growth model , effective demand , growth rate , demand management , growth theory , aggregate (composite) , keynesian economics , microeconomics , aggregate behavior , macroeconomics , econometrics , mathematics , market economy , monetary policy , materials science , geometry , composite material , human capital
This paper presents a generalized Keynes‐Kaldor growth model which incorporates both the Cambridge theory of income distribution and endogenous technical change. Within the model, the rate of aggregate demand growth affects both the level of aggregate demand and the rate of output growth. However, demand growth management can only be used to shift the economy from low to high growth equilibria, and cannot produce continuous adjustments in the equilibrium rate of growth. This reveals that management of the growth trajectory is a qualitatively different problematic from management of the level of output. Lastly, the model highlights ambiguities regarding the adjustment dynamics of demand growth.