Mainstream and Heterodox Sources of Endogenous Growth: Some Linkages and the Role of Income Distribution

Abstract

Much of the recent mainstream literature on economic growth focuses on the role played by factors such as human capital, technical change and innovation, leaving somehow aside the crucial role which physical capital accumulation previously played in economic theory. As underlined in section one, a positive linkage between physical and human capital accumulation is however ex-plicitly admitted by many mainstream endogenous economic growth theorists. They, however, accept either assumptions about physical capital accumulation presented in Solow model based on long run Say’s law validity or accept neoclassical factor demand functions, based on marginal productivity. In both endogenous and exogenous mainstream growth models, income inequalities are thus assumed to positively affect physical capital accumulation and partially or fully affect human capital accumulation as well. Second section presented heterodox arguments contesting both the concept of monotonous productive factor demand functions and the long run validity of Say’s law. It was, then, pointed out that in heterodox growth theory an independent, and much underestimated by mainstream authors, channel of economic growth endogenization can be found. Third section stressed that, once Keynesian long run physical capital accumulation path-dependency from short and long run evolution of aggregate demand and income distribution is considered, a strong positive relation between income inequalities reduction, technical change and both human and physical capital accumulation can be expected to follow. Integration of Keynesian and mainstream approaches was argued to could possibly increase the relevance of sources of endogenous growth present in both approaches and to reduce the inopportune long-short run divide still affecting economic theory.