Macroeconomic and Technological Dynamics : A Structuralist-Keynesian Cumulative Growth Model

In the Structuralist-Keynesian approach, economic growth is a cumulative causation process driven by a continuous interaction between macroeconomic and technological dynamics, involving several structural variables. In this context, labour productivity is both an input of the growth process, influencing macroeconomic dynamics, and a consequence of growth, because technological progress is endogenous and depends on macroeconomic dynamics. The aim of this paper is to build a Structuralist-Keynesian cumulative growth model driven by the dynamic interaction between the demand regime and the productivity regime. The model specifies the role of labour productivity and unit labour costs in the macroeconomic and technological dynamics. The results show that the effect of unit labour cost dynamics on economic growth depends on the degree of product market competition, innovation, and the distributional effects on aggregate demand. Finally, the main relationships of the model are empirically investigated for the European countries in the period 1992-2012, using both System GMM and Difference GMM dynamic panel models