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Employment and fiscal policy in a Marxian model
Author(s) -
Thompson Stephen
Publication year - 2018
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/meca.12214
Subject(s) - investment function , economics , public investment , investment (military) , wage , profit (economics) , function (biology) , distribution (mathematics) , monetary economics , capital accumulation , capital (architecture) , labour economics , keynesian economics , fiscal policy , macroeconomics , microeconomics , production (economics) , archaeology , biology , law , history , mathematical analysis , mathematics , evolutionary biology , politics , political science
This article presents a simple formalization of Marx's circuit of capital framework, but with some modern additions: a public sector, an investment function that shifts over time in reaction to disequilibria, and a ‘wage curve’ linking income distribution to the size of the reserve army of labor. The dynamics can gravitate toward either a low‐employment trajectory in which public spending has expansionary long‐run effects, or a high‐employment trajectory characterized by a profit squeeze. The stability of the different trajectories depends on the investment function.