Endogenous economic growth: a new approach

Abstract

This new approach incorporates on the demand side the problem of effective demand and unemployment, while rejecting on the supply side the oversimplistic use of a production function, with or without capital--labour substitution. The focus on the adoption and diffusion of labour productivity growth permits viewing supply as being driven endogenously by inter-class conflict over distribution as well as inter-class conflict among rival firms over market shares. The result is a race between growth rates in labour productivity and in the real wage rate, which drives demand and productivity growth on the one hand, while making wage share reasonably constant on the other. The existence and stability properties of the steady state are also examined. Copyright 2006, Oxford University Press.