Technical Report Capital-Labor Conflict in the Harrodian model

OHNO, Takashi

2015-11 , Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University
This study's primary objective is to examine a capital-labor conflict in the Harrodian model by explicitly accounting for not only reserved army effects but also capital-labor substitution. By modifying the benchmark framework, we attempt to view the debate on the long-run stability condition in the Harrodian model and the effects of various economic policies on fostering economic growth from a different viewpoint. Using this model, we find following results. First, we find that an indirect effect of capacity utilization on investment through the imperfect labor market makes the model stable. Second, the capital-labor substitution does not always have a stabilizing effect. Finally, the reserved army effect becomes stronger and the model unstable (stable) if capital-labor substitution is small (large).

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