Income distribution, technical change, and economic growth: A two-sector Kalecki–Kaldor approach

Abstract

This paper presents a two-sector Kalecki-Kaldor model of income distribution, technical change, and economic growth. The model is Kaleckian in the sense that it incorporates mark-up pricing, investment independent of saving, and excess capacity. It is also Kaldorian in that labour productivity growth is led by Kaldor's technical progress function. In other words, productivity growth is endogenously realised through the technology embodied in new capital stock, which differentiates our model from previous two-sector models. Our extension drastically changes the standard Kaleckian implications. We find that although the economic activity levels in the short run are led by the demand and income distribution parameters, economic growth in the long run is realised by supply-side (i.e. technical change and the associated productivity and wage growth) parameters. The important implication of our findings is that a two-sector economy faces a trade-off between a high economic growth rate and the local stability of the steady state.

The impact of income gap on regional green economic growth – evidence from 283 prefecture-level cities in China

“…It mainly increases the volatility of regional fiscal resources, reduces investment opportunities for low-income groups and inhibits economic growth (Mendonça and Baca, 2021). However, in different economic stages, the impact of the IG is not fixed (Nishi, 2022). In terms of environmental effects, there is a positive correlation between the IG and carbon emissions (Zhang et al, 2022b).…”