Decisions on investment allocation in the post-keynesian growth model

Abstract

In this article the growth models of Feldman (1928) and Mahalanobis (1953) are extended to consider the analysis of decisions of investment allocation in the context of the Post-Keynesian Growth Model. By adopting this approach it is possible to introduce distributive features in the Feldman-Mahalanobis model that allows us to determine the rate of investment allocation according to the equilibrium decisions of investment and savings. Finally, an additional condition is added to the Post-Keynesian Growth Model in order to fully characterise the equilibrium path in an extended version of this framework, where capital goods are also needed to produce capital goods.

Economic policy, environment and sustainable growth

“…According to (Kalecki, 1954) and (Steindl, 1981) the determinants of the profit share are included in the investment function. Bhaduri and Marglin (1990) were the first who challenged the Robinsonian ( 1962) assumption that investment simply depends on the rate of profit and argued that it also depends on the rate of capacity utilization (Araujo & Teixeira, 2012;Stockhammer & Onaran, 2004;Hein, 2016). Therefore, we assume that investment depends positively on the rate of profit and the rate of capacity utilization (Bhaduri & Marglin, 1990).…”