Departmental Bulletin Paper Who Should Bear the Pain of Price Competition ?: A Kaleckian Approach

Fujita, Shinya

(E16-5) 2016-07 , 名古屋大学大学院経済学研究科附属国際経済政策研究センター
Ongoing globalization and the rise of neoliberalism have intensified price competition in both domestic and international markets. If we consider a cost reduction owing to price competition, the question inevitably becomes who suffers the pain of reducing costs. By constructing a Kaleckian model with an intermediate goods sector and a final goods sector, we investigate which economic agent, firms or workers in either sector, should take responsibility for the cost reduction to maintain aggregate demand and growth. Our results show that firms in the final goods sector should be targeted, as cutting the mark-up rate in that sector is likely to promote capacity utilization and capital accumulation. Moreover, we show that forcing the burden of the cost reduction onto workers in the intermediate goods sector is undesirable because it decreases demand as well as the growth rate.

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