Monday, February 18, 2013
Posted by D. Daniel Sokol
Takashi Ohno, Ritsumeikan University analyzes Models of Competition between Firms: Endogenous Market Structure in the Kaleckian Model.
ABSTRACT: The purpose of this paper is to incorporate free entry into the Kaleckian model. To this end, we consider a model with monopolistic competition, mark‐up pricing and a free‐entry condition. Using this model, the Kaleckian model is unstable under a wage‐led growth regime, and it is stable under a profit‐led growth regime, when the interest rate is supposed to be constant. Stability under a wage‐led growth can be achieved if the interest rate is allowed to respond positively to capacity utilization. We also find that a goods market policy, but not an income distribution policy, is then effective from an economic growth perspective.