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This article examines Chapter 5 'Effective Demand and Employment' in Post-Keynesian Economics: New Foundations by Marc Lavoie. This chapter covers one of the most distinctive contributions of the post-Keynesians, and one of its most profound insights. Analysis of effective demand and employment is a crucial and distinct foundation of post-Keynesian economics. Identifying the determinants of the level of employment and output represent one of the most significant contributions of post-Keynesian analysis. This is in total contrast to mainstream theory, according to which the level of output and employment are determined in the labour market, with labour seen as just another commodity, and the wage rate playing the role of the price equating supply and demand for labour. For post-Keynesians, the main determinant of the level of output and employment is the level of effective demand rather than the wage rate. Their views on the labour markets, taking into account segmented labour markets and efficiency wages, are considered. The determinants of profits and the profit share play important roles in the determination of employment and output. It is argued that fiscal policy plays a vital role in economic stabilisation, and that the typical arguments regarding its limitations are incorrect. [ABSTRACT FROM AUTHOR]

This paper examines, from the perspective of Post-Keynesian economics, the effects of Foreign Direct Investment (FDI) on the employment rate in 18 post-transitional European countries from 1995 to 2021. Using a two-step system Generalised Method of Moments (GMM) panel data estimator, we test the hypothesis that the employment impact of investment depends on the interaction of FDI and domestic investment in terms of crowding-in and crowding-out relationships, assuming that this relationship is sensitive to the sectoral distribution of FDI stock. Our findings suggest that the reallocation of FDI inflows from the manufacturing sector to the less labour intensive financial and information and communication technology (ICT) sectors tends to reduce the employment effect of FDI both directly and indirectly by reducing the magnitude of the crowding-in effect of FDI on domestic investment. The outcome of our study is of great interest to economic policy makers. If foreign investment displaces domestic investment and reduces employment in high value-added sectors, policies intended to attract foreign capital could be challenged and undermined. Otherwise, if foreign and domestic investment in sectors with high added value are complementary, it justifies policies aimed at attracting foreign investment. [ABSTRACT FROM AUTHOR]