European economies in light of the Keynesian cum Kaldorian macroeconomic distribution theory: An investigation

In this paper, we present a combination of Keynesian and Kaldorian macroeconomic distribution theory. An important outcome of our research is that the (total) savings ratio is a positive function of the profit quota. In the empirical section of the paper, we first present the development of the saving quotas, of the profit quotas and of the total tax quotas among 8 European countries between 1999 and 2014. Furthermore, we conduct a linear regression analysis for the countries mentioned and find empirical support for a savings function in the vein of Nicholas Kaldor. We also find empirical support for the (modified) so-called second Keynesian equation. Finally, some economic policy thoughts and a summary with a scope for future research close our exposition.

Objectives: The paper sets up a combination of the Keynesian and the Kaldorian distribution theory. Thereby, we want to endogenize the overall savings ratio. This ratio is determined theoretically by the intersection of a modified version of the second Keynesian equation and a savings function in the vein of Nicholas Kaldor. The purpose of the empirical part is to estimate savings functions for a sample of European countries. In the final section we draw some conclusions for economic policy.

Data/Methods: The paper is theoretical in the first part and empirical in the second, making use of standard tools of statistical/econometric analysis.

Results: The paper shows that (i) the savings quota is an endogenous macroeconomic variable which depends on the profit quota. (ii) The latter, in turn, is determined primarily by the deficit quota, the private investment quota and the export-import-balance-quota. (iii) When estimating the so-specified savings-function in a linear regression exercise, we achieve satisfactory results for a panel of European countries, making use of recent annual data for the year 2016 from Eurostat.