Unemployment and Growth: Putting Unemployment into Post Keynesian Growth Theory

Post Keynesian (PK) growth models typically fail to model unemployment. That shows up in the absence of an equilibrium condition requiring the growth of employment to equal labor-supply growth. Consequently, the models can have an imploding or exploding unemployment rate. The underlying analytical problem is failure to resolve the Harrod (1939)–Solow (1956) knife-edge problem. This paper shows how that knife-edge problem can be resolved via a Kaldor–Hicks technological progress function. It applies the concept to several different PK growth models. In the Harrod, super-multiplier, Cambridge, and neo-Kaleckian models the warranted rate rules the roost and natural rate forces have no impact on the equilibrium growth rate. However, in a modified neo-Kaleckian model, with labor market distribution conflict, both warranted rate and natural rate forces impact steady state growth.