Date: Nov 7, 2019
Title: Conflict as a closure in a model of growth and distribution under financialization
The seminar by Dr. Srinivas Raghavendran, J.E. Cairnes School of Business and Economics, National University of Ireland Galway (NUI Galway).
In this paper, we show how the conflict between the shareholders (owners) and managers of firms in terms of profit rates generates dynamics between growth and distribution that results in a long-run variation in the capacity utilization rate. The conflict as a closure, we believe, provides a more realistic microeconomic underpinning to study the impact of distribution on capital accumulation. Our model neither takes the approach of the existence of normal utilization rate that is relied upon by the Harrodian authors (Skott 2008, Skott and Ryoo, 2008) nor the one of actual rate of utilization affecting normal or desired rate of utilization that is adopted by the Post Keynesian authors (Hein 2012, Lavoie, 2003). The model developed here generates oscillations in the rate of capacity utilization in the short run before settling down to its long-run value. Furthermore, the long-run value of the rate of capacity utilization falls within a range of plausible values and this range is determined by the conflict between shareholders and managers. The dynamics of the model yields hysteresis in that it generates two different disequilibrium growth paths when shareholders and managers struggle to gain control of the firm.
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