FMM Working Paper

neo-Kaleckian macro models for undergraduate teaching: Monopoly, inequality, and the economy

This article presents neo-Kaleckian macroeconomic models that are intended for under-graduate instruction at the introductory and intermediate levels. The neo-Kaleckian approach incorporates markup pricing, monopoly power, and income distribution into a demand-driven macro model for short-run analysis. The model is used to demonstrate the potentially stagnating effects of increased monopoly power and the more expansionary impact of tax cuts on wages compared with profits. This article also shows how a neo-Kaleckian model can be used to analyze the cases in which aggregate demand and the level of output are either 'wage-led' or 'profit-led.' For pedagogical reasons, the models are presented in a way that is parallel to how mainstream Keynesian theory is typically covered in undergraduate macro textbooks.

Keywords: Aggregate demand; autonomous spending; multiplier; profit share; wage-led demand; profit-led demand; monopoly capitalism; markup pricing; tax cuts; Michal Kalecki; Josef Steindl; economic stagnation