Autonomous government expenditure growth, deficits, debt, and distribution in a neo-Kaleckian growth model

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper is linked to some recent attempts at including a non-capacity creating autonomous expenditure category as the driver and determinant of growth into Kaleckian distribution and growth models. Whereas previous contributions have focussed on taming Harrodian instability, generated by the deviation of the goods market equilibrium rate of capacity utilisation from a normal or target rate of utilisation, we rather focus on the so far neglected issues of deficit, debt and distribution dynamics in such models. For this purpose we treat the growth of government expenditures on goods and services, financed by credit creation, as the exogenous growth rate driving the system. We examine the medium-run convergence of the system towards such a growth rate, analyse the related long-run debt dynamics and deal with stability and income distribution issues. Finally we touch upon the economic and, in particular, fiscal policy implications of our model results.

Some observations on models of growth and distribution with autonomous demand growth

“…This case is analyzed in Dutt (in press). Hein (2016) considers the case with adaptive expectations, which adds a state variable, to the system, obtaining a dynamic system with three state variables. 12 This formulation can be taken to show capitalist consumption grows exogenously and workers keep up with them because of conspicuous consumption.…”

Autonomous demand, Harrodian instability and the supply side

“…Government consumption is highlighted by Allain () and Hein () and also included by Dutt () and Girardi and Pariboni (). As a source of autonomous demand it may seem immune to the problems associated with private consumption and residential investment.…”

“…Government consumption is highlighted by Allain (2015a) and Hein (2016) and also included by Dutt (2015) and Girardi and Pariboni (2016). As a source of autonomous demand it may seem immune to The problem is similar to that which invalidates the use of basic consumption: if the basic need for housing is socially determined, then the medium and long run growth in residential investment cannot be taken as independent of the growth rate of incomes.…”

“… See among others, Serrano (), De‐Juán (), Serrano and Freitas (, ), Allain (, ), Cesaratto (), Dutt (), Girardi and Pariboni (), Pariboni (), and Lavoie (). Other contributions, including Hein (), explore the implications of autonomous demand in models without Harrodian instability.…”

The short- and long-run inconsistency of the expansionary austerity theory: a post-Keynesian/evolutionist critique

“…Once again, this result stems from the fact that debt accumulation (as a ratio of GDP) can be selfstabilizing, since that its own growth also raises private sector's wealth and income (through interest payments), this way increasing consumption, GDP and tax revenues. In Hein (2016), such Keynesian-type expansionary effects of a higher growth rate of public expenditures give rise to a "paradox of debt": an increase in primary government deficits gives rise to a fall in the long-run stable public debt-output ratio.…”