Aggregate Demand and Endogenous Growth: a Generalized Keynes‐Kaldor Model of Economic Growth

This paper presents a generalized Keynes‐Kaldor growth model which incorporates both the Cambridge theory of income distribution and endogenous technical change. Within the model, the rate of aggregate demand growth affects both the level of aggregate demand and the rate of output growth. However, demand growth management can only be used to shift the economy from low to high growth equilibria, and cannot produce continuous adjustments in the equilibrium rate of growth. This reveals that management of the growth trajectory is a qualitatively different problematic from management of the level of output. Lastly, the model highlights ambiguities regarding the adjustment dynamics of demand growth.