The central motivation of this paper is to consider the microfoundations of the neo-Kaleckian model with monopolistic competition, by explicitly considering the effect of entry deterrence. Using this model, the neo-Kaleckian model is stable even though the Keynesian stability condition is not satisfied. In the long run, we find various economic policies which depend on not only their growth regimes but also their market structures. When there is cooperative marketing agreement between competitors, an increase in the income distribution in favor of workers may lead to an increase in the growth rate even though the model is based on a profit-led growth regime.
