'Financialisation' in Kaleckian/Post-Kaleckian models of distribution and growth

Abstract

The macroeconomic effects of ‘financialisation’ are assessed applying two different variants of a Kaleckian model of distribution and growth. The focus is on the effects of changes in distribution between shareholders/rentiers, firms and workers, as well as on the effects of increasing ‘shareholder value orientation’ of management’s investment decisions. An isolated increase in the ‘shareholder value orientation’ of management’s investment decisions has a uniquely negative effect on capacity utilisation, the profit rate and capital accumulation in both models. An associated rise in the dividend rate, however, has contradicting effects. In both Kaleckian models the ‘normal’ case of a negative effect throughout the endogenous variables, the ‘puzzling’ case of a positive effect throughout, and an ‘intermediate’ case with a positive effect on capacity utilisation and the profit rate and with a negative effect on capital accumulation may arise, depending on the parameter values in the investment and the saving function of the models. ‘Profits without investment’, the ‘intermediate’ case in both models, is a possible medium- or long-run accumulation regime. However, if a rising dividend rate is associated with a particularly strong increase in the mark-up and hence with pronounced redistribution at the expense of labour, the possibility of such a regime will be undermined, provided that unit profits do not have a strong effect on firms’ real investment. The long-run sustainability of such a regime will also be questioned by the adverse effects of low investment on capital stock and productivity growth.Financialisation, Distribution, Growth, Kaleckian models