STOREP CONFERENCES, STOREP 2016 - Engines of growth and paths of development in the minds of analysts, policy makers and human beings

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The adjustment of capacity to demand and the Sraffian Supermultiplier: theory and some applications
Riccardo Pariboni

Last modified: 2016-06-11

Abstract


According to the Sraffian Supermultiplier model, originally presented in Serrano (1995), output growth is shaped by the evolution of the autonomous components of demand. As a demand-led growth model, the Sraffian Supermultiplier displays several desirable properties: a) the extension to the long-run of the Keynesian Hypothesis (Garegnani, 1992); b) an investment function based on the accelerator mechanism, without at the same time engendering Harrodian instability; c)      the absence of any necessary relation between the rate of accumulation and normal income distribution; d) an equilibrium level for the degree of capacity utilization equal to the normal, cost-minimizing one. In this essay I will provide a brief discussion and clarification of some aspects of the model, focusing my attention in particular on the feasibility of the adjustment mechanism of capacity to demand. I will then use some insights that can be derived from the theoretical construction for two purposes: at first, I will maintain that the model can be considered a reasonably satisfactory, if schematic and necessarily stylized, interpretative tool of real world phenomena, as I will try to show by means of a simple investigation of the macroeconomic consequences of debt-financed household consumption. Secondly, I will argue that a proper consideration of the autonomous components of demand allows highlighting some unsatisfactory aspects of the influential Marglin-Bhaduri model (Marglin and Bhaduri, 1990; Bhaduri and Marglin, 1990) and in particular of its investment function.


Keywords


Effective Demand, Economic Growth, Supermultiplier

Full Text: Paper Pariboni