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KALECKI’S THEORY OF DISTRIBUTION

KALECKI’S THEORY OF DISTRIBUTION. STATES THAT. PROFIT SHARE OUT OF NATIONAL INCOME IS A DIRECT FUNCTION OF DEGREE OF MONOPOLY POWER. PROFIT SHARE OUT OF NATIONAL INCOME IS A DIRECT FUNCTION OF THE RATIO OF RAW MATERIAL COST TO WAGE COST. BACKGROUND.

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KALECKI’S THEORY OF DISTRIBUTION

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  1. KALECKI’S THEORY OF DISTRIBUTION

  2. STATES THAT • PROFIT SHARE OUT OF NATIONAL INCOME IS A DIRECT FUNCTION OF DEGREE OF MONOPOLY POWER. • PROFIT SHARE OUT OF NATIONAL INCOME IS A DIRECT FUNCTION OF THE RATIO OF RAW MATERIAL COST TO WAGE COST

  3. BACKGROUND • THE TEMPO CREATED BY SRAFFA, JOAN ROBINSON, CHAMPRELIN ETC. • ALMOST IN A MARXIAN STYLE

  4. ASSUMPTIONS • INDUSTRIES WORK WITH EXESS CAPACITY • LERNER’S DEGREE OF MONOPOLY POWER HOLDS GOOD • MC INCLUDES ONLY LABOUR COST AND RAW MATERIAL COST • LABOUR COST INCLUDES ONLY WAGES OF LABOUR • SALARIES ARE INCLUDED IN THE INCOME OF CAPITALISTS. Cntd------

  5. Cntd-------- • THUS, p-m INDICATES PROFITS AND INCLUDES ENTREPRENEURRIAL PROFITS[INCLUDING DIVIDEND] AND OVERHEAD OSTS [INTEREST,DEPRECIATION AND SALARIES] • THE FIRMS HAVE THE SMC EQUAL TO SAC [ LAB AND RM COST] OVER A RANGE CALLED THE RANGE OF PRACTICAL CAPACITY.

  6. KALECKI FIRST FORMULATED HIS MODEL IN 1939 AND, IN RESPONSE TO CRITICISM, HE REVISED THE MODEL IN 1959.

  7. THE FIRST VERSION WAS BASED ON LERNER’S DEGREE OF MONOPOLY POWER:

  8. FIRST VERSION LENER’S MEASURE OF DEGREE OF MONOPOLY IS

  9. AS THE ASSUMPTION • MC [m] =AC [a] • WE CAN RESTATE THE EQUATION AS:

  10. NOW [p-a] REPRESENTS THE GROSS INCOME OF CAPITALISTS PER UNIT OF OUTPUT. THE GROSS INCOME OF CAPITALISTS FOR THE TOTAL QTY OF GOOD IS :

  11. THE GROSS PROFIT INCOME FOR ALL THE FIRMS OR THE ECONOMY AS A WHOLE IS:

  12. HERE THE TOTAL VOLUME OF THE OUTPUT OF ALL THE GOODS PRODUCED AND SOLD IN THE ECONOMY IS:

  13. THIS IS CALLED THE AGGREGATE TURNOVER[T].T IS MADE UP OF THE VALUE OF GROSS NATIONAL PRODUCT PLUS THE VALUE OF THE RAW MATERIALS.THUS, …..

  14. WHAT HAPPENS TO THE SHARE OF WAGE AND PROFIT WHEN THE DEGREE OF MONOPOLY POWER CHANGES?

  15. THE SHARE OF WAGES, P & W

  16. CONCLUSION • SHARE OF WAGE [W/Y] IS A DECREASING FUNCTION OF DEGREE OF MONOPOLY POWER AND THE RATIO OF RAW MATERIAL COSTS TO WAGE COSTS

  17. PREDICTION • AS CAPITALISM DEVELOPS ALONG WITH INCREASING STRENGTH OF MONOPOLIES, LABOUR SHARE DECLINES.

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