Growth Theory and the Growth Model Perspective: Insights from the Supermultiplier

Abstract

Recently, demand-led growth theories reshaped the study of comparative political economy. Since the Baccaro and Pontusson critique of Varieties of Capitalism, a new wave of studies has sought to analyze national economies in terms of their main demand driver of growth. Post-Keynesian authors provided extensions to perfect the fit between demand-led growth theories and comparative political economy. We argue that the Sraffian supermultiplier provides a growth theory compatible with the growth model perspective advanced by Baccaro and Pontusson and has advantages over Kaleckian and New Keynesian approaches. The concept of the autonomous components of demand, which comprise government spending, export, and debt-financed consumption, is already central for the studies of growth models. The supermultiplier provides a theory that coherently understands the relation between the autonomous demand drivers and the other induced components of demand. We demonstrate our arguments by decomposing the growth of four advanced economies: the United States, Germany, Japan, and Sweden. The decomposition shows the importance of separating the autonomous from the induced components and highlights the relevance of public expenditures and exports as growth drivers in advanced economies.

When is the long run?—Historical time and adjustment periods in demand‐led growth models

“…In the length of time spanning from a change in today's conditions to the realization of a new equilibrium, further changes are likely to affect the growth process: history has a pervasive influence on the determination of economic outcomes and growth processes (Setterfield, 1995(Setterfield, , 1997. Rather than focusing, as the existing literature sometimes does, on the mere comparison between two equilibrium positions, researchers should pay more attention to the properties that characterize the models' trajectories during the traverse, for example, by discussing out-of-equilibrium growth effects, path dependency and so on (Morlin et al, 2021). The examination of the models' timescale and adjustment period is a fundamental piece of information and a key factor for understanding the relation between the theoretical framework and the real world.…”

Growth models and comparative political economy in Latin America

“…The distinct role of autonomous expenditures leads to the discussion of the political economy of government expenditures, exports and debt-financed consumption. An analysis based on the political economy of the autonomous components of demand (Morlin et al, 2022) can also contribute to understanding the coevolution of growth models between central and peripheral economies.…”

“…A shortcoming of Baccaro and Pontusson's analysis is the choice of a Kaleckian strand of demand-led growth theory. Although the choice of a demand-led theory is an advance in comparison with VoC approaches, the Kaleckian theory hardly fits together with their analysis of growth led by autonomous components of demand (see Morlin et al, 2022). A growth model with autonomous components of demand (where exports or government expenditures lead growth) is actually provided by the literature on the Sraffian Supermultiplier (Freitas e Serrano, 2015;Allain, 2014;Lavoie 2016).…”

“…We also introduce the Sraffian supermultiplier approach (Freitas & Dweck, 2013;Freitas & Serrano, 2015) into the growth models perspective (Baccaro & Pontusson, 2016). The supermultiplier approach brings to the forefront the "autonomous components of demand" and reclaims an analysis of its socio-political determinants (Morlin et al, 2022).…”

“… See Hope and Soskice (2016). For criticism of this view, seeStockhammer (2021, p. 5-6) andMorlin et al (2022).…”