R&D-based economic growth in a supermultiplier model

Abstract

We investigate how economic growth in a demand-led economy with semi-endogenous productivity growth can be compatible with a stable employment path. Our model uses a Sraffian supermultiplier (SSM), and we endogenize the growth rate of autonomous demand, and semi-endogenize productivity growth. The basic model has a steady state that is consistent with a stable employment rate. Consumption smoothing (between periods of high and low employment) by workers is the mechanism that keeps the growing economy stable. We also introduce a version of the model where the burden for stabilization falls upon government fiscal policy. This also yields a stable growth path, although the parameter restrictions for stability are more demanding in this case.

When is the long run?—Historical time and adjustment periods in demand‐led growth models

“…The benchmark values of the propensities to save and to import are set in accordance to the empirical evidence in the US economy as discussed by Girardi and Pariboni (2016), Fazzari et al (2020) and Gallo (2021). 12 Last, the supermultiplier-specific parameter γ -which measures the reaction of the investment share to changes in the utilization rate -is taken from Nomaler et al (2021). The remaining parameters β and μ (specific to the neo-Kaleckian model) are both taken from Allain (2021).…”

“…Unfortunately, these two parameters are exactly the ones for which we do not have sufficient empirical support. Whilst the existing literature provides a sufficiently solid ground to justify the baseline values for most parameters, these foundations become more shaky when it comes to the reaction coefficients, as also noted by Nomaler et al (2021) for the Supermultiplier model. Solving numerically the system for bigger and smaller values of γ and β would allow to assess how the two parameters affect the speed of the dynamic adjustment in the Supermultiplier and the amended neo-Kaleckian model, respectively.…”

“…Last, the supermultiplier‐specific parameter γ – which measures the reaction of the investment share to changes in the utilization rate – is taken from Nomaler et al. (2021). The remaining parameters β and μ (specific to the neo‐Kaleckian model) are both taken from Allain (2021).…”

“…Whilst the existing literature provides a sufficiently solid ground to justify the baseline values for most parameters, these foundations become more shaky when it comes to the reaction coefficients, as also noted by Nomaler et al. (2021) for the Supermultiplier model.…”

Growth and Distribution Regimes Under Global Value Chains: Diversification, Integration and Uneven Development

“…This section presents some Structuralist contributions that aim at complementing the absence of distribution in the BPCM framework. The Structuralist literature (Taylor, 2021), with the Kaldorian literature on adjustments between supply and demand (Fazzari et al, 2020;Setterfield, 2011;Nomaler et al, 2021) offer a solution to model the determinants of functional income distribution.…”