Modern post-Keynesian developments: growth, instability and cycles
A substantial literature emerged in the early 1980s on the interplay between economic growth and income distribution in economies in which failures of effective demand can have permanent effects on the utilization of productive resources.
The model developed by Rowthorn (1981), Dutt (1984) and Taylor (1985) is characterized by the presence of an independent investment function. Assuming low sensitivity of accumulation to variations in utilization, with a given or changing mark-up, their models were able to address growth-cycles issues simultaneously. However, others - like Skott (2010) - argued that the integration of cycles and growth analyses was better explored by incorporating an Harrodian investment function likely to generate an unstable warranted growth path. An Harrodian investment function could be compatible with multiple steady growth solutions (some stable), allowing for new foundations for endogenous cycles along an increasing trend. For instance, Skott (2010) shows that destabilizing Harrodian effects with stabilizing Marxian mechanisms can produce a combined understanding of growth and cycles.