Amitava Krishna Dutt

MATURITY, STAGNATION AND CONSUMER DEBT: A STEINDLIAN APPROACH

This paper extends a Steindlian model of growth and income distribution to incorporate borrowing by consumers. It shows that borrowing by consumers can improve growth prospects in the short run by increasing consumer demand. However, in the longer run the effects of increasing consumer borrowing are ambiguous because, by increasing consumer debt, it redistributes income towards the rich who have a higher propensity to save, thereby possibly depressing aggregate demand and growth despite the borrowing-induced expansion. The problem may be exacerbated by financial considerations involving the increase of the interest rate due to greater borrowing, but these considerations are not necessary for it. The problem is more likely to occur when autonomous investment demand is weak, i.e. when borrowing-induced consumption increases are most required to counter tendencies towards stagnation.

Aggregate Demand, Aggregate Supply and Economic Growth

Abstract While mainstream growth theory in its neoclassical and new growth theory incarnations has no place for aggregate demand, Keynesian growth models in which aggregate demand determines growth neglect the role of aggregate supply. By assuming that the rate of technological change responds to labour market conditions, this paper develops a simple and conventional growth model that integrates the roles of aggregate demand and aggregate supply. The model shows how the long‐run equilibrium growth rate of the economy, at which the unemployment rate is constant, can be affected by aggregate demand.

The pattern of direct foreign investment and economic growth

Abstract This paper examines the relationship between the sectoral pattern of direct foreign investment (DFI) and growth using theoretical and empirical analysis. The theoretical analysis suggests that different patterns of DFI—because of their differential effects on the North-South terms of trade and on Southern technological development—can be expected to affect growth in host countries differently. The empirical analysis using crosscountry growth equations, however, is unable to detect any effects of the pattern of DFI on growth. It is argued that detailed case studies of particular countries would be valuable for exploring the empirical issues involved.

Conflict inflation, distribution, cyclical accumulation and crises

Abstract This paper develops a model of inflation, distribution and accumulation. The theory of inflation is a conflict theory in which inflation results from the conflicting claims on income made by workers and firms, claims which are affected by the relative bargaining power of the two groups. This bargaining power affects the distribution of income, and therefore the pattern of accumulation in the economy, which in turn affects how the bargaining power of different groups changes over time. The model shows how the economy can experience cyclical growth, alternating between periods of excess capacity and full capacity utilization, and comments on the possibility, and implications, of deep slumps from which recovery is difficult.

Foreign direct investment and economic growth in less developed countries: an empirical study of causality and mechanisms

We examine the causality between foreign direct investment (FDI) and economic growth for 66 developing countries, taking into account their interaction with exports and technological change. Time series analysis for each country is conducted, based on a method introduced by Toda and Yamamoto (1995) for testing Granger causality in the presence of nonstationary time series. The main findings of this article are: FDI causes growth in several of the developing countries, but the mechanism through which this works differs across countries and reverse causality from growth to FDI exists for many countries.

Interest rate policy, effective demand, and growth in LDCs

Orthodox criticisms of ‘financial repression’ in LDCs argue that interest rate liberalization promotes investment and economic growth by increasing the supply of bank credit and improving the efficiency of credit allocation. The present paper develops a Kaleckian model in which increases in deposit interest rates may lower investment and growth by placing downward pressure on effective demand – even if interest rate liberalization results in decreased borrowing costs. The focus of the Kaleckian model on effective demand issues is then contrasted with prior criticisms of the proliberalization view. Finally, the relevance of the Kaleckian approach is demonstrated in connection with the important role of effective demand and distributional effects in the failure of the Chilean financial liberalization to promote a stable growth of output and investment.

A post-Keynesian theory of growth, interest and money

While firmly based in the classical tradition, the work of Luigi Pasinetti, together with that of Joan Robinson and Nicholas Kaldor, has laid the foundations of a Post-Keynesian approach to the theory of growth, interest and money. The approach is ‘Post-Keynesian’ in the sense that it combines elements of Keynes’s (1936) ideas in the General Theory, as well as the extension of those ideas as developed in the last three decades by economists following the Cambridge tradition in Keynesian economics.1 The purpose of this paper is to attempt to synthesize the Post-Keynesian contributions by providing a critical discussion of the conceptual elements of the approach, and by developing a formal model of growth in which monetary aspects are explicitly taken into consideration.

Thirlwall’s Law and Uneven Development

Abstract: Thirlwall’s analysis of balance-of-payments–constrained growth, and what has come to be called Thirlwall’s Law, have usually been used to understand the determinants of growth for individual countries. This paper argues that another important use of Thirlwall’s Law is to understand the mechanics of uneven development between rich and poor countries. To contribute to such an analysis the paper incorporates Thirlwall’s analysis into a model of North–South trade to show how it explains uneven development. The paper also points to the needfor empirical work necessary for relating Thirlwall’s Law to uneven development, which is different from the work related to the law that has proliferated in recent years.

The Dependence Effect, Consumption and Happiness: Galbraith Revisited

In his analysis of the affluent society, Galbraith argued that advertising and the sales promotion activities of firms create wants for people, which makes them consume more without making them better off, because their wants were artificially created. Thus, in the affluent society, ever-increasing levels of production (and consumption) do not increase welfare. This paper considers three criticisms of Galbraiths analysis: first, firms cannot ‘create’ wants for consumers without their consent, because consumers are not mere pawns in their hands; second, even if peoples wants are created, they may be better off by consuming more; and third, that expansion of consumption can make people better off by expanding aggregate demand. It draws on the recent literature on consumption, income and happiness, and develops a simple model of growth and distribution, to argue that Galbraiths analysis holds up against these criticisms.

Wage bargaining, imperfect competition and the markup: Optimizing microfoundations

Abstract Combining the conjectural variations and Nash bargaining approaches it is shown that the demand-insensitive markup depends on the bargaining power of unions relative to owners of firms (in addition to more standard product market characteristics).