A(nother) Note on the Inconsistency of Neo-Kaleckian Growth Models

CSWP 31 (May 2018)

Author Riccardo Pariboni and Daniele Girardi

Keywords Neo-Kaleckian model; Autonomous Demand; Sraffian Supermultiplier; Normal Utilization

JEL E11; E12; E22

As a matter of common knowledge, the canonical Neo-Kaleckian growth model is not able to reconcile the actual and normal rates of utilization in equilibrium. Dávila-Fernández et al. (2017) revive an old proposal for solving this problem – making the rate of normal utilization an endogenous variable that converges to the actual utilization rate – justifying it with new premises, based on a recent contribution to production theory (Nikiforos 2013). In this note, we argue that their proposed adjustment mechanism is based on restrictive assumptions, some of which have little economic justification. Moreover, we show that also if one puts aside for the sake of argument the perplexities regarding the ‘endogenization’ of the normal rate of utilization, the existence of autonomous components of demand is sufficient to invalidate their results.

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