Endogenous money, increasing returns and economic growth: Nicholas Kaldor's contribution

Nicholas Kaldor's contribution to economic theory covers a wide range of topics, elaborated in different historical contexts, such as theories of economic growth and the balance of payments, studies on interregional divergences and monetary theory. In most cases, historians of economic thought have devoted their attention to single aspects of his contributions. This paper aims at integrating Kaldor's monetary theory and his view of the relevance of increasing returns. It will be shown that, in Kaldor's view, economic growth is driven by increasing effective demand which, in turn, positively affects the path of labour productivity, and that this mechanism is fully in operation on the condition that the banking sector does not restrict credit supply.