Daniele Girardi
DEPS, Università di Siena
Riccarco Pariboni
DEPS, Università di Siena
Abstract
According to the Sraffian supermultiplier model, economic growth is driven by the autonomous components of aggregate demand (exports, public spending and autonomous consumption). This paper tests empirically some major implications of the model. For this purpose, we calculate time-series of the autonomous components of aggregate demand and of the supermultiplier for the US, France, Germany, Italy and Spain and describe their patterns in recent decades. We observe that changes in output and in autonomous demand are tightly correlated, both in the long and in the short-run. The supermultiplier is substantially higher and more stable in the US, while in the European countries it is lower and strongly decreasing. Consistently with theory, we find that where the supermultiplier is reasonably stable - i.e., in the US since the 1960s - autonomous demand and output share a common long-run trend (i.e, they are cointegrated). The estimation of a Vector Error-Correction model (VECM) on US data suggests that autonomous demand exerts a long-run effect on GDP, but also that there is simultaneous causality between the two variables. We propose an explanation based on the idea that autonomous demand is socially and historically determined. We then estimate the multiplier of autonomous spending through a panel instrumental-variables approach, finding that a one dollar increase in autonomous demand raises output by 1.6 dollars over four years. A further implication of the model that we test against empirical evidence is that increases in autonomous demand growth tend to be followed by increases in the investment share. Through Granger-causality tests and instrumental variables analysis, we find that this is the case in all five countries. An additional 1% increase in autonomous demand raises the investment share by 0.57 percentage points of GDP in the long-run
Keywords
Growth, Effective Demand, Supermultiplier
Jel Codes
E11, E12, B51, O41
