If the world’s countries seriously tackle the climate targets agreed in Paris, their citizens will likely experience substantial changes in production, consumption and employment.
This paper presents a long-run post-Keynesian model for studying the potential implications of a major transition on macroeconomic stability and employment. It is a demand-led model in which firms have considerable but not absolute freedom to administer prices, while household consumption exhibits inertia.
The model produces business cycles and long waves driven by technological change. The paper presents results for a “downshifting” scenario in which households voluntarily withdraw labor, and it discusses the implications of downshifting for stability, growth, and employment. It contrasts this downshifting scenario with ones in which households reduce consumption without withdrawing from the labor pool.