Working paper N. 764 Novembre 2017
Mauro Caminati
DEPS, Università di Siena
Serena Sordi
DEPS, Università di Siena
Abstract
This paper contributes to the recent macro-dynamics literature on demand-led growth, that borrows insights from the idea expressed long ago by J. Hicks (1950) that Harrodian instability may be tamed by a source of autonomous expenditure in the economy. Contrary to the other contributions in this literature, autonomous expenditure is not exogenous, but is driven by a flow of profit-seeking R&D and innovation expenditures, that raise labour productivity through time. If the state of distribution, hence the wage share, is exogenously fixed and constant, the model gives rise to a macro-dynamics in a two dimensional state space, that may converge to, or give rise to limit cycles around, an endogenous growth path. An exogenous rise of the profit share exerts negative e¤ects on long-run growth and employment, showing that growth is wage led.
Keywords
wage-led growth; endogenous autonomous expenditure; labour-saving technological progress: limit cycles.
Jel Codes
E11; E12; O41
