KALECKI’S KALECKI’S THEORY OF THEORY OF
DISTRIBUTIONDISTRIBUTION
STATES THATSTATES THAT
PROFIT SHARE OUT OF NATIONAL PROFIT SHARE OUT OF NATIONAL INCOME IS A DIRECT FUNCTION OF INCOME IS A DIRECT FUNCTION OF DEGREE OF MONOPOLY POWER.DEGREE OF MONOPOLY POWER.
PROFIT SHARE OUT OF NATIONAL PROFIT SHARE OUT OF NATIONAL INCOME IS A DIRECT FUNCTION OF INCOME IS A DIRECT FUNCTION OF THE RATIO OF RAW MATERIAL COST THE RATIO OF RAW MATERIAL COST TO WAGE COSTTO WAGE COST
BACKGROUNDBACKGROUND
THE TEMPO CREATED BY SRAFFA, THE TEMPO CREATED BY SRAFFA, JOAN ROBINSON, CHAMPRELIN ETC.JOAN ROBINSON, CHAMPRELIN ETC.
ALMOST IN A MARXIAN STYLE ALMOST IN A MARXIAN STYLE
ASSUMPTIONSASSUMPTIONS
INDUSTRIES WORK WITH EXESS INDUSTRIES WORK WITH EXESS CAPACITYCAPACITY
LERNER’S DEGREE OF MONOPOLY LERNER’S DEGREE OF MONOPOLY POWER HOLDS GOODPOWER HOLDS GOOD
MC INCLUDES ONLY LABOUR COST MC INCLUDES ONLY LABOUR COST AND RAW MATERIAL COSTAND RAW MATERIAL COST
LABOUR COST INCLUDES ONLY WAGES LABOUR COST INCLUDES ONLY WAGES OF LABOUROF LABOUR
SALARIES ARE INCLUDED IN THE SALARIES ARE INCLUDED IN THE INCOME OF CAPITALISTS. Cntd------INCOME OF CAPITALISTS. Cntd------
Cntd--------Cntd--------THUS, p-m INDICATES PROFITS AND THUS, p-m INDICATES PROFITS AND INCLUDES ENTREPRENEURRIAL INCLUDES ENTREPRENEURRIAL PROFITS[INCLUDING DIVIDEND] AND PROFITS[INCLUDING DIVIDEND] AND OVERHEAD OSTS OVERHEAD OSTS [INTEREST,DEPRECIATION AND [INTEREST,DEPRECIATION AND SALARIES]SALARIES]
THE FIRMS HAVE THE SMC EQUAL TO THE FIRMS HAVE THE SMC EQUAL TO SAC [ LAB AND RM COST] OVER A SAC [ LAB AND RM COST] OVER A RANGE CALLED THE RANGE OF RANGE CALLED THE RANGE OF PRACTICAL CAPACITY.PRACTICAL CAPACITY.
KALECKI FIRST KALECKI FIRST FORMULATED HIS MODEL IN FORMULATED HIS MODEL IN 1939 AND, IN RESPONSE TO 1939 AND, IN RESPONSE TO CRITICISM, HE REVISED THE CRITICISM, HE REVISED THE
MODEL IN 1959.MODEL IN 1959.
THE FIRST VERSION WAS THE FIRST VERSION WAS BASED ON LERNER’S BASED ON LERNER’S
DEGREE OF MONOPOLY DEGREE OF MONOPOLY POWER:POWER:
FIRST VERSIONFIRST VERSIONLENER’S MEASURE OF DEGREE OF LENER’S MEASURE OF DEGREE OF
MONOPOLY ISMONOPOLY IS
AS THE ASSUMPTIONAS THE ASSUMPTION
MC [m] =AC [a]MC [m] =AC [a]
WE CAN RESTATE THE EQUATION AS:WE CAN RESTATE THE EQUATION AS:
NOW [p-a] REPRESENTS THE NOW [p-a] REPRESENTS THE GROSS INCOME OF GROSS INCOME OF
CAPITALISTS PER UNIT OF CAPITALISTS PER UNIT OF OUTPUT. THE GROSS OUTPUT. THE GROSS
INCOME OF CAPITALISTS INCOME OF CAPITALISTS FOR THE TOTAL QTY OF FOR THE TOTAL QTY OF
GOOD IS :GOOD IS :
THE GROSS PROFIT INCOME THE GROSS PROFIT INCOME FOR ALL THE FIRMS OR THE FOR ALL THE FIRMS OR THE ECONOMY AS A WHOLE IS:ECONOMY AS A WHOLE IS:
HERE THE TOTAL VOLUME HERE THE TOTAL VOLUME OF THE OUTPUT OF ALL THE OF THE OUTPUT OF ALL THE
GOODS PRODUCED AND GOODS PRODUCED AND SOLD IN THE ECONOMY IS:SOLD IN THE ECONOMY IS:
THIS IS CALLED THE THIS IS CALLED THE AGGREGATE TURNOVER[T].AGGREGATE TURNOVER[T].T IS MADE UP OF THE VALUE T IS MADE UP OF THE VALUE
OF GROSS NATIONAL OF GROSS NATIONAL PRODUCT PLUS THE VALUE PRODUCT PLUS THE VALUE
OF THE RAW MATERIALS.OF THE RAW MATERIALS.THUS, …..THUS, …..
WHAT HAPPENS TO THE WHAT HAPPENS TO THE SHARE OF WAGE AND PROFIT SHARE OF WAGE AND PROFIT
WHEN THE DEGREE OF WHEN THE DEGREE OF MONOPOLY POWER MONOPOLY POWER
CHANGES?CHANGES?
THE SHARE OF WAGES, P & W THE SHARE OF WAGES, P & W
CONCLUSIONCONCLUSION
SHARE OF WAGE [W/Y] IS A SHARE OF WAGE [W/Y] IS A DECREASING FUNCTION OF DEGREE DECREASING FUNCTION OF DEGREE OF MONOPOLY POWER AND THE OF MONOPOLY POWER AND THE RATIO OF RAW MATERIAL COSTS TO RATIO OF RAW MATERIAL COSTS TO WAGE COSTSWAGE COSTS
PREDICTIONPREDICTION
AS CAPITALISM DEVELOPS ALONG AS CAPITALISM DEVELOPS ALONG WITH INCREASING STRENGTH OF WITH INCREASING STRENGTH OF MONOPOLIES, LABOUR SHARE MONOPOLIES, LABOUR SHARE DECLINES.DECLINES.
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