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.