Putting unemployment into Post Keynesian growth theory: Unemployment and growth
Post Keynesian (PK) growth models typically fail to model unemployment. That shows up in the absence of any equilibrium condition requiring the growth of employment equal effective labor supply growth. Consequently, the models can have an imploding or exploding unemployment rate. The underlying analytical problem is failure to resolve the Harrod (1939) knife edge problem. This paper shows how the knife-edge problem can be resolved via a Kaldor - Hicks technological progress function. The paper applies the concept to several different PK growth models. In the Harrod, super-multiplier, Cambridge, and neo-Kaleckian models the warranted rate rules the roost and natural rate forces have no impact on the equilibrium growth rate. However, in a modified neo-Kaleckian model with labor market distribution conflict both warranted rate and natural rate forces impact steady state growth.
Unemployment and growth
FMM Working Paper, 30 Seiten