Endogenous Growth: A Kaldorian Approach

Abstract

This paper explores the Kaldorian approach to endogenous growth theory. The central principles of this approach are explored, including the claims that growth is: (a) demand-led, with trade playing a central role in aggregate demand formation; and (b) path-dependent. It is shown that both the actual and natural rates of growth are path dependent in the Kaldorian tradition. The implications of inequality between the actual and natural rates of growth are investigated, and it is shown that mechanisms exist within the Kaldorian tradition that are capable of reconciling these growth rates. This results in the sustainability (in principle) of any particular equilibrium value of the actual rate of growth

Keywords: endogenous growth, Kaldor, path dependence, demand-led growth, technical change, institutions, natural rate of growth

JEL Classification: O41, O43, O47, O31, E12