Enriching the Neo-Kaleckian Growth Model: Nonlinearities, Political Economy, and Financial Factors
Thomas I. Palley | 10/15/2013

This paper expands the neo-Kaleckian growth model to include nonlinearities, political economy factors, and interest rate and stock market effects. The expansions enrich the model and enhance its capacity to analyze and explain developments within contemporary capitalist economies. Nonlinearities can potentially make economies both wage- and profit-led, and failure to control for nonlinearities may result in misleading conclusions about the structure of the economy. Political economy analysis suggests capitalís desire for profit maximization results in a lower growth rate. Lastly, the paper shows why q theory of investment is inconsistent with the neo-Kaleckian approach to capital accumulation and a higher q can be associated with a fall in the rate of investment.

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