Kalecki meets Schumpeter: The decline of competition in a demand‐led dynamic model

Abstract

AbstractThis paper contributes to the post‐Keynesian literature by building a macrodynamic Kaleckian model that incorporates recent evidence on market concentration and its relationship with capital accumulation and income distribution using Schumpeterian insights. This is done in two steps. First, we model a two‐dimensional system that sets the dynamics between the wage share and the capital‐effective labor supply ratio. Then, we extend the model, in the second step, to a three‐dimensional system that incorporates the state‐transition function of concentration. Our model suggests that higher market concentration may be associated with a permanent decline in employment, capacity utilization, wage share, and capital accumulation.