ECON 797K: Modeling growth and distribution, spring 2012 Wed 6:15-9pm

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1 ECON 797K: Modeling growth and distribution, spring 2012 Wed 6:15-9pm Peter Skott Office: Thompson 904 Office hours: TuTh 10-11am This course focuses on (i) (ii) (iii) the formal modeling of growth and distribution within a broadly Keynesian and/or neo-marxian approach. Most of the theoretical models assume a closed, one-sector, capitalist economy. models of uneven development. Notions of uneven development have been prominent in the heterodox tradition and the modeling involves spatial and sectoral disaggregation the relation of the models to mainstream theories of endogenous growth. Evaluation will be based on (i) problem sets, (ii) a take-home midterm exam, and (iii) a final exam (either a traditional exam or a term paper we'll decide that when we meet). The weights will be 20%, 40%, and 40%, respectively. Outline: The readings below are preliminary. Core readings (which we will cover in detail) are indicated by an asterisk. I Introduction 25 Jan: Stylized facts; welfare issues; Harrod; the Solow-Swan model. * Acemoglu, D Introduction to modern economic growth, Princeton University Press, chapters 1-2. Harrod (1939) An essay in dynamic theory. Economic Journal, Harrod handout. Pogge, T. (2008) "Growth and Inequality: Understanding Recent Trends and Political Choices", Dissent, Solow, R.M. (1956) A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70,

2 II Post-Keynesian and neo-marxian one-sector growth models 1 Feb: Harrod and the choice of technique; the 'generic post-keynesian model' (handouts); the Kaleckian model and the Marglin-Bhaduri modification (Dutt 1984, Marglin-Bhaduri 1990); extensions with endogenous technical change (Dutt, Setterfield) 8 Feb: Neo-Marxian models (Bowles&Boyer 1990, Marglin 1984, Dumenil and Levy 1999) 15 Feb: Utilization rates and the specification of accumulation (Skott 2012, Hein et al. 2012, Schoder, Nikiforos, Skott&Zipperer 2010); application to Japan (Nakatani&Skott) 22 Feb: Growth effects of 'financialization' (Dutt 1995, Stockhammer 2004, Skott&Ryoo 2008) * Bhaduri, A. and Marglin, S.A. (1990) "Unemployment and the real wage: the economic basis for contesting political ideologies". Cambridge Journal of Economics, Blecker, R. (1989) "International competition, income distribution and economic growth". Cambridge Journal of Economics, 14, pp Blecker, R. (2002) "Distribution, demand and growth in neo-kaleckian macro-models". In M. Setterfield (ed.) The economics of demand-led growth, Elgar. Bowles, S. (1985) The production process in a competitive economy. American Economic Review, * Bowles, S. and Boyer, R. (1990) A wage-led employment regime. In S.A. Marglin and J. Schor (eds) The golden age of capitalism, Oxford University Press. * Dumenil, G., Levy, D. (1999) "Being Keynesian in the Short Term and Classical in the Long Term: The Traverse to Classical Long-Term Equilibrium", The Manchester School, 67, p * Dutt, A.K. (1984) "Stagnation, income distribution and monopoly power". Cambridge Journal of Economics, 8, pp Dutt, A.K. (2006) "Aggregate Demand, Aggregate Supply and Economic Growth". International Review of Applied Economics, Vol. 20, No. 3, * Dutt, A.K. (1995) "Internal finance and monopoly power in capitalist economies: a reformulation of Steindl's growth model". Metroeconomica, 46:1, pp

3 Flaschel, P. and Skott, P. (2005) "Steindlian models of growth and stagnation". Metroeconomica, Foley, D. and Michl, T. (2001) Growth and distribution. Harvard University Press, chapter 10. Foley, D. K., Taylor, L. (2006): A Heterodox growth and distribution model, in Salvadori, N. (ed.) Economic Growth and Distribution, Edward Elgar Publishing, Northampton, MA. * Hein, E., Lavoie, M., van Treeck, T. (2011): `Some instability puzzles in Kaleckian models of growth and distribution: a critical survey', Metroeconomica, Kaldor (1956) Alternative theories of distribution. Review of Economic Studies, Kaldor (1957) A model of economic growth. Economic Journal, Kalecki, M. (1968) Trends and business cycles reconsidered. Economic Journal, Lavoie, M. (1995) "The Kaleckian model of growth and distribution and its neo- Ricardian and neo-marxian critiques". Cambridge Journal of Economics, 19, pp Lavoie, M. and Godley, W. ( ) Kaleckian growth models in a stock and flow monetary framework: a Kaldorian view. Journal of Post Keynesian Economics, * Marglin (1984) Growth, distribution, and inflation: a centennial synthesis. Cambridge Journal of Economics, Marglin, S., Bhaduri, A. (1990): Profit squeeze and Keynesian theory, in Marglin, S., Schor, J.(eds), The Golden Age of Capitalism: Reinterpreting the Postwar Experience, Clarendon Press, Oxford. Nakatani, T. and Skott, P. (2007) "Japanese growth and stagnation: A Keynesian perspective". Structural Change and Economic Dynamics, 2007, Vol. 18, Iss. 3, pp Robinson, J. (1962) Essays in the Theory of Economic Growth. London and Basingstoke: Macmillan, (mainly chapter 2). Rowthorn, B. (1981) "Demand, real wages and economic growth". Thames Papers in Political Economy.

4 Skott, P. (1989a) Conflict and effective demand in economic growth. Cambridge: Cambridge University Press. Skott (2011) "Growth theory". Mimeo; revised version of entries on Growth theories (Keynesian) and Growth theory (neo-marxian) in P. Arestis and M. Sawyer (eds) Radical Political Econnomy, Elgar, * Skott, P. (2012) "Theoretical and empirical shortcomings of the Kaleckian investment function". Metroeconomica, Feb. 2012, pp * Skott, P. and Ryoo, S. (2008) "Macroeconomic implications of financialisation". Cambridge Journal of Economics, 32, pp Skott, P. and Zipperer, B. (2010) "An empirical evaluation of three post Keynesian models". UMass WP Forthcoming in Intervention European Journal of Economics and Economic Policies Steindl, J. (1952) Maturity and stagnation in American capitalism. Oxford: Blackwell, chapters (mainly chapters 9,10,13). * Stockhammer, E. (2004) "Financialisation and the Slowdown of Accumulation". Cambridge Journal of Economics, 28, pp Taylor, L. (1985) "A stagnationist model of economic growth". Cambridge Journal of Economics, 9, pp III Uneven development 29 Feb: Cumulative causation; Kaldorian models with learning by doing (Skott&Larudee 1998, Krugman 1987, Dixon&Thirlwall 1975, Westphal 1990, Setterfield, McCombie and Thirlwall 1999) 7 March: Real exchange rates 14 March: Big push in closed and open economies (Murphy et al. 1989, Skott&Ros 1997, NYT Jan 2012) Dixon, R.J. and A.P.Thirlwall (1975) A Model of Regional Growth Rate Differences on Kaldorian Lines, Oxford Economic Papers, July. Dutt (1990) Growth, distribution and uneven development. Cambridge University Press. Kaldor, N. (1966) Causes of the slow rate of economic growth in the United Kingdom. Cambridge: Cambridge University Press.

5 Kaldor, N. (1970) The Case for Regional Policies. Scottish Journal of Political Economy, pp Krugman, P. (1987) The Narrow Moving Band, the Dutch Disease, and the Competitive Consequences of Mrs. Thatcher. Journal of Development Economics, pp McCombie, J. and A. Thirlwall Growth in an international context: a Post Keynesian view. In J. Deprez and J. Harvey (eds) Foundations of International Economics: Post Keynesian Perspectives. London, Routledge. * Murphy, K.M., Shleifer, A. and Vishny, R.W. (1989) Industrialization and the Big Push. Journal of Political Economy, Razmi, A., Rapetti, M and Skott, P. (2012) "The real exchange rate and economic development". Structural Change and Economic Development. Ros, J. (2000) Development theory and the economics of growth. University of Michigan Press. Ros, J. and Skott, P. (1998) Dynamic effects of trade liberalization and currency overvaluation under conditions of increasing returns. Manchester School, Rosenstein-Rodan, P. (1943) Problems of industrialization in Eastern and South-Eastern Europe. Economic Journal, * Skott, P. and Larudee, M. (1998) Uneven Development and the Liberalization of Trade and Capital Flows, Cambridge Journal of Economics, * Skott, P. and Ros, J. (1997) The big push in an open economy with non-tradable inputs. Journal of Post Keynesian Economics, Westphal, L.E. (1990) Industrial Policy in an Export-Propelled Economy: Lessons from South Korea s Experience. Journal of Economic Perspectives, pp IV "New growth" 4 April: Sectoral shifts (Restuccia et al) 11 April: AK models; human capital (Lucas) 18 April: R&D based models (Romer, Nelson, Teece) 25 April: Institutions (Acemoglu&Robinson)

6 * Acemoglu, D. and Robinson, J.A. (2000) "Political Losers as a Barrier to Economic Development". The American Economic Review, Vol. 90, No. 2, Papers and Proceedings (May), pp Jones, C. I. (1999). Growth: With or without Scale Effects? AER Papers and Proceedings 89, Jones, C. I., and P. M. Romer, 2010, The new Kaldor facts: Ideas, institutions, population, and human capital, American Economic Journal: Macroeconomics, vol. 2 (1), * Lucas, R.E. (1988) On the Mechanics of Economic Development. Journal of Monetary Economics, pp Nelson, R.N. (1992) What Is Commercial and what Is Public About Technology, and what should be?. In N. Rosenberg, R. Landau and D. Mowery (eds) Technology and the Wealth of Nations (Stanford University Press). Nelson, R. and Wright, G. (1992) The Rise and Fall of American Technological Leadership. Journal of Economic Literature, pp Perotti, R. (1996) Growth, Income Distribution, and Democracy: What the Data Say. Journal of Economic Growth, Restuccia, D., Yang, D.T. and Zhua, X. (2008) "Agriculture and aggregate productivity: A quantitative cross-country analysis". Journal of Monetary Economics 55, pp Rodrik, D. (1997) The Paradoxes of the Successful State. European Economic Review, Rodrik, Dani The real exchange rate and economic growth. Brookings Papers on Economic Activity, Vol. 2, pp Rodrik,D.,A. Subramanian and F. Trebb (2004) "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development" Journal of Economic Growth, 9(2), , 06. Romer, P. (1990) Endogenous Technological Change. Journal of Political Economy, pp. S71-S102. Solow, R.M. (1994) Perspectives on Growth Theory. Journal of Economic Perspectives, Teece, D.J. (1992) Strategies for Capturing the Financial Benefits from Technological Innovation. In N. Rosenberg, R. Landau and D. Mowery (eds). Technology and the Wealth of Nations (Stanford University Press).

7 V Conclusions Friday 27 April: General summing-up and discussion