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Supermultiplier, innovation and the ecosystem

A stock-flow dynamic model.

Supermultiplier, innovation and the ecosystem_png

28 January 2019

UCL Institute for Innovation and Public Purpose (IIPP)
Working Paper

Ref: IIPP WP 2019-01
Supermultiplier, innovation and the ecosystem: A stock-flow dynamic model (PDF)

Matteo Deleidi
Honorary Research Associate 
UCL Institute for Innovation and Public Purpose

Riccardo Pariboni
Research Associate
Roma Tre University, Rome, Italy 

Marco Veronese Passarella
Lecturer of Economics
Leeds University Business School 

Abstract

This work builds upon four different theoretical approaches: i. the Sraffian supermultiplier model; ii. the Schumpeterian framework of evolutionary economics that emphasises the entrepreneurial role of the state; iii. the ‘stock-flow consistent’ approach to macroeconomic modelling; and iv. recent developments in ecological economics literature aiming at cross-breeding post-Keynesian theories and models with more traditional ‘green’ topics. Our main purpose is to develop a simple analytical tool that can help examine: a) the impact of government spending on private innovation; b) the impact of innovation on economic growth and the ecosystem; and c) the impact of ecological feedbacks on economic growth and government spending effectiveness. We find that, in principle, government can be successful in supporting innovation and growth while slowing down matter and energy reserves’ depletion rates, and tackling climate change. However, the latter may well affect government policy effectiveness.


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