Technical change, eective demand and economic growth

The model developed in this paper has distinctly classical, but also Schumpeterian and Keynesian features. The main analysis is explored in an aggregate (one goods) setting, but many of the results carry over to a multi-sectoral setting. Sections 2 and 3 present the main components of the model in its equilibrium setting. Here we show the classical wage-pro ts and consumption vs. investment/growth trade-os. We also show the con-ditions which have to be satised for full employment growth. Important are distributive requirements- particularly the determination of the real wage- which allow the economy to achieve full employment in the face of (positive) productivity shocks and changes in the available labour force. This issue is further explored in section 4 in the context of changing (exogenous) growth rates of productivity and labour force growth. Real wage adjustments are also required if the economy is to remain on a full employment path and prot-receivers change their behaviour with respect to investment vs. consumption spending. Section 5 moves to discuss o-steady state analysis and introduces further components into the model. In 'disequilibrium ' there is no immediate price-to-cost ad