Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202939
Authors: 
Basu, Deepankar
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018-06
Abstract: 
Bhaduri and Marglin (1990) had argued that an investment function which has the profit rate and the capacity utilization rates as the two determinants of investment imposes unwarranted restrictions on the macroeconomic model and rules out profit-led expansion. In this paper, I show that this critique only holds in a closed economy model. In an open economy model, such an investment function does not rule out profit-led expansion. I argue that the problem was less in the investment function itself than in the larger model within which it was embedded, in particular the saving behavior of the macroeconomy entailed by the model.
Subjects: 
structuralist model
investment function
profit-led expansion
JEL: 
E12
B51
Document Type: 
Working Paper

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