This study develops a duopoly model incorporating artificial intelligence (AI) R&D investment and wage bargaining to analyze firms' wage and AI investment decisions. The main findings are as follows: First, bargaining power and AI R&D investment efficiency affect equilibrium results regardless of bargaining function forms. Second, bargaining modes influence how AI R&D investment affects wages and firm behavior. Third, AI R&D investment decisions are jointly determined by bargaining mode, bargaining power and R&D investment efficiency. When high-skilled labor and AI investment exist a complementary effect, worker welfare and social welfare remain unchanged under different bargaining modes.
This article places the work of Lance Taylor in the broader context of efforts in the 1980s to renew the structuralist tradition of development economics, into what was then newly coined as neo-structuralism. These efforts centred around three groups: CEPAL, Lance Taylor and his team at MIT, and a group of economists based at the Institute of Social Studies in The Hague. The efforts included a strong focus on theoretical modelling, in which Lance Taylor played a leading role, albeit with much tension and debate from within these efforts, especially around whether to accommodate or reject neoclassical microfoundations. Taylor's position was ambiguous in this regard, although he was possibly pushed towards a more explicit heterodox position in the 1990s through the interactions and debates between these three groups in the 1980s.
This paper presents a Structuralist-Post-Keynesian model of growth, distribution, and inflation target. The simulation results show that inflation can be on target under very different structural configurations, meaning that there is more than one growth rate consistent with a given inflation target, and the same holds for the employment rate, the labor share, and the real interest rate. The results also show that endogenous indexation sets a limit to expansionary policies because, if inflation stays too high for too long, inflation becomes rigid downwards and explosive upwards. On the other hand, contractionary policies can produce self-fulfilling slow-growth expectations.
A post-Keynesian-Kaleckian model along structuralist lines is developed to incorporate the issue of racial inequality into the analysis of growth and distribution. It draws on ideas presented in the literature about the relationship between class inequality between capitalists and workers, and racial inequality between White and Black workers, including the recent contributions to stratification economics. The model formalizes the dynamics of racial and class inequality to show that racial discrimination can persist in the long run, but various patterns of the evolution of inequality can emerge, including stable equilibria, multiple equilibria and instability. The dynamics is found to depend on whether growth is wage led or profit led, and on how racial inequality affects and is affected by class inequality.
We propose a demand-led heterogeneous firm macroeconomic model to study the impact of an exchange rate devaluation on output and financial stability. We simulate the model and find that, in the presence of foreign debt, a devaluation can have contractionary effects. This effect is mediated by the responsiveness of exports to the exchange rate and is attenuated when the traditional trade channel is stronger. Still, the balance sheet effect operates increasing indebtedness and financial instability.
A profit-led Goodwin mechanism generates the observed counterclockwise activity-labor share cycle. Introducing a financial linkage can reproduce this pattern even when demand is not profit-led. This paper extends neo-Goodwinian theory by incorporating the valuation ratio into a four-dimensional model. We show that the model can generate a limit cycle and that the Goodwin pattern arises in simulations without profit-led demand when financial interactions are present. Redistribution affects cyclical dynamics but has no steady-state growth effects.
The Goodwin model, based on a system of two nonlinear differential equations, offers a parsimonious model of business cycle fluctuations in capitalist economies. In this paper, we offer two simple proofs that solution trajectories are closed orbits. We also conduct empirical analyses with annual data for 54 postwar business cycles across 15 OECD economies. We find that the qualitative predictions of the model about the direction of cycles is largely valid; we find the quantitative predictions of the model are very good for the employment rate but less so for the wage share.
This paper investigates the implications of output gap uncertainty for the conduct of fiscal policy using a small-scale macroeconomic model with boundedly rational agents. Specifically, agents use an adaptive updating mechanism to approximate the unobservable potential output that suffers, similarly to the Hodrick and Prescott (1997) filter, from an end-point bias. This generates an unintendedly procyclical fiscal policy that affects the government's credibility and by extension the sovereign risk premium. Our simulations highlight the importance of this so-called bond vigilantes channel, as well as of the government's credibility among financial markets, for the sustainability of government debt and for macroeconomic stability.
We develop a neo-Kaleckian growth-and-distribution model featuring two classes of workers and a progressive income tax. Two fiscal closures are considered: balanced budgets and deficit financing via public debt. We study the responses to shocks, including changes in functional income distribution, and assess how tax progressivity alters demand and accumulation regimes. Outcomes hinge on the interaction between class-specific saving-rate differentials and tax progressivity. Hence, redistribution and tax-reform policies should be designed to match the economy's context and underlying saving behavior, rather than following a one-size-fits-all rule.
This paper extends the classical approach to income distribution to an open economy with country-specific distributive variables. We study a two-country system with trade in intermediate goods. Using Schur complements and -matrices tools, we characterize the wage-profit configurations compatible with semipositive prices, showing they define a three-dimensional surface that generalizes the wage curve of closed economies. The inverse relation between wages and profits may not hold unconditionally within each country: wages and profits can rise or fall simultaneously. The distributive conflict thus unfolds across social classes and countries, adding a geopolitical layer to the classical theory of distribution.
This paper aims to outline an alternative classification of growth regimes for developing countries by integrating distribution and employment regimes within an open-economy neo-Kaleckian framework. The novelty of the paper lies in combining the Kaleckian models of conflict and autonomous expenditures with the Kaldor-Verdoorn mechanism. Depending on the relative strength of the KV coefficient with respect to the workers' bargaining power, the paper identifies at least four distinct growth regimes: (1) inequality-decreasing, job-creating, (2) inequality-neutral, job-creating, (3) inequality-increasing, job-creating and (4) inequality-increasing, jobless.
National wage-setting systems with pattern wage bargaining (PWB) were developed under fixed exchange rates. Under floating regimes, high exchange rate volatility interacts with PWB, creating complex wage-price dynamics. Using Norway as a case, we model these dynamics under empirically relevant long-term exchange rate fluctuations. Comparative statics show that, with one-way causality from depreciation to wages, steady-state inflation remains robust. Under two-way causality, the steady state is altered, potentially shifting mean inflation and, in some cases, generating explosive wage-exchange rate dynamics. Simulations of calibrated dynamic PWB models illustrate these effects and provide insights relevant for policy design.
This paper examines the complex relationship between government debt and income distribution within a post-Keynesian framework. Extending the model of You and Dutt (1996), we model both capitalists and workers as holders of government bonds, enabling a more nuanced analysis of income distribution dynamics. In our model, public debt accumulation does not invariably lead to greater inequality, but it can reduce income disparities instead. The mechanism at work diverges from the conventional account according to which a redistribution from taxpayers to bondholders occurs. Instead, the more important channel operates through the expansionary effects of public borrowing. When the analysis is extended to allow for an endogenous rise in real interest rates, the outcome also reflects the dampening of investment and, consequently, reduced growth. The distributional consequences of higher debt therefore depend on the forces driving accumulation and the extent to which they generate expansionary dynamics.
This paper explores the endogenous managerial delegation choice in a Cournot third-country model with network externalities. Each exporting firm's owner chooses between a sales delegation and a relative-performance delegation contract. It is shown that in a Cournot third-country model with free trade, both owners optimally choose relative performance delegation. In contrast, under discriminatory import tariffs, sales delegation becomes the optimal strategy for both firms.
This paper investigates the determinants and stability conditions of the public debt-to-GDP ratio within a theoretical framework representing the main characteristics of a monetary economy of production. To this end, we develop a dynamic Stock-Flow Consistent (SFC) model based on the Supermultiplier approach, incorporating both bank and fiat money, capital accumulation and endogenous public debt service. Steady-state values are derived, and stability is assessed through both analytical and simulation-based approaches. Our main findings show that the public debt-to-GDP ratio is positively influenced by the saving rate and negatively influenced by the growth rate of autonomous demand components and the capital intensity of the economy. The effects of the interest rate and tax rate are found to be non-linear, depending on the growth regime emerging in the economy. Under the "standard-regime", the tax rate has a negative impact, while the impact of the policy rate is positive. Given the exogenous parameters, and under the stability conditions, there exists a long-run level of public debt-to-GDP ratio toward which the economy converges. These results challenge the rationale for applying blanket regulations on public budgets, disregarding the distinct traits of each economic system.
The paper argues that the Sraffian interpretation of Classical economics overlooks the individual dimension and the role of willingness to pay in Smith's definition of effectual demand. Generalizing a recent Smithian model of individual choice in precapitalistic economies, a model of individual choice in a Sraffian framework is proposed that allows a precise formulation of individual and aggregate effectual demand coherent with Smith's view. The model allows also a short-period analysis of markets and it provides sufficient conditions for the Classical adjustment process to converge towards the long-period configuration, thus mitigating Steedman's criticism to the Classical view of gravitation.
The paper investigates the capacity of New Keynesian (NK) models to explain inflation persistence without relying on ad hoc backwards-looking mechanisms or external source of inertia. It explores various features of NK models- such as sticky wages, roundabout production structure, positive trend inflation, and monetary policy inertia- that could generate persistent inflation. The paper's main finding is that the interaction between sticky prices, sticky wages, intermediate input, real frictions and the Taylor rule, especially the inertial component of the rule, is particularly effective in generating highly serially correlated movements in inflation as observed in data.
Pasinetti's thought on economic growth evolved from a study of regular growth to a theory of structural change, while maintaining a double reference to the Classical and to the Keynesian theories, a specific attention being paid to the possibility and the conditions of full employment. The paper points at some questions set by the presence of capital goods in his regular growth model and by their absence in his later creative destruction model.
The purpose of this paper is to contribute to the integration of unpaid caregiving in the household into short- and long-term macroeconomic theory and, in particular, the theoretical structure of production on the supply-side of the economy. The ambition of the project is to furnish a general theoretical representation of how unpaid caregiving and its (gendered) social structure contributes to the technical conditions of production in the sphere of marketed output. In so doing, it aims to provide macro theorists with an apparatus that allows consistent description of both short-term (levels of activity) and long-term (rates of growth) macro outcomes in a manner that routinely integrates feminist insights regarding the gendered structure of the social reproduction of labour into macroeconomic analysis.
