This paper derives measures of potential output and capacity utilization for a number of OECD countries, using a method based on the cointegration relation between output and the capital stock. The intuitive idea is that economic capacity (potential output) is the aspect of output that co-varies...

The idea that saving is the force driving private investment and economic growth has become ever more entrenched in mainstream economic thought as well as in the minds of policymakers and the general public. Even though the empirical evidence that increased household saving will directly...

Based on neoclassical theory, cutting budget deficits has come to be seen as a principal way to increase long-run growth, but the empirical evidence is ambiguous on the outcome of this macropolicy. A new model, the classical growth cycles (CGC) model, offers an alternative theoretical framework...

This paper addresses two broad questions. The first one relates to the economic rationale for the existence of the welfare state. To address this question, we review the marginalist arguments and then counterpose a historical and institutional analysis of the rise of the U.S. welfare state. The...

This paper raises questions about austerity policies by investigating the effects of the state's tax and expenditure policies on the warranted growth rate. It proposes two mechanisms to raise the warranted growth rate in the event that there is long-run unemployment. First, it incorporates...

This paper contrasts the different approaches to export-led growth used by Harrod and Thirlwall. It argues that, unlike Thirlwall's model, Harrod emphasized the importance of both demand- and supply-sides in his analysis of growth. The fundamental difference between the two authors lies in their...

This paper investigates the effects of budget deficits within a classical-Harrodian framework in a closed economy. In this framework, growth and cycles are endogenous, underutilized capacity is a recurrent phenomenon, capacity utilization fluctuates around the normal level in the long run, and...

This paper is an extension of an earlier working paper ("Finance and the Macroeconomic Process in a Classical Growth and Cycles Model," Levy Institute Working Paper No. 253). The basic structure of the model remains unchanged in that it is based on a social accounting matrix (SAM) with...

From the spurring of productivity and the incubation of new technologies to its role in the maintenance of the safety and security of citizens, public investment is widely recognized to play a central role in the long-term economic and social development of society. This article will discuss the...

Jamee Moudud provides a new microfoundational explanation for the Harrodian long-run or warranted growth rate. The author, emphasizing the role of Keynesian uncertainty, shows that the growth model is anchored in a new interpretation of the Oxford Economists’ Research Group’s microeconomic...