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An Intertemporal Pasinettian Model with Government Sector


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  • Joao Ricardo Faria

    (School of Social Sciences, University of Texas at Dallas¡XRichardson, U.S.A.)

  • Ricardo Azevedo Araujo

    (Catholic University of Brasilia, Brazil)


This paper analyses the relevance of the Cambridge equation in the presence of government when the assumption of fixed savings is relaxed. We consider an intertemporal representative agent model with Pasinettian features. The results are: (i) the equilibrium distribution of income between wages and profits, as stated by the Cambridge equation, is not affected by the occurrence of sustained deficits or surpluses, (ii) the rate of profit is not determined by the Cambridge equation, and (iii) only taxation on profits affects the profit rate and, as a consequence, capital accumulation, wages, and output.

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Bibliographic Info

Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

Volume (Year): 3 (2004)
Issue (Month): 3 (December)
Pages: 257-268

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Handle: RePEc:ijb:journl:v:3:y:2004:i:3:p:257-268

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Keywords: intertemporal choice; factor income distribution;

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  1. Faria, Joao Ricardo & Teixeira, Joanilio Rodolpho, 1999. "Growth and Stability in a Model with Pasinettian Saving Behaviour and Neoclassical Technology," Manchester School, University of Manchester, vol. 67(1), pages 111-21, January.
  2. Denicolo, Vincenzo & Matteuzzi, Massimo, 1990. "Public Debt and the Pasinetti Paradox," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 14(3), pages 339-44, September.
  3. F. H. Fleck & C.-M. Domenghino, 1990. "Government Activity Does Invalidate the "Cambridge Theorem of the Rate of Profit"," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 12(3), pages 487-497, April.
  4. Pasinetti, Luigi L, 1989. "Ricardian Debt/Taxation Equivalence in the Kaldor Theory of Profits and Income Distribution," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 13(1), pages 25-36, March.
  5. Baranzini, Mauro, 1991. "A Theory of Wealth Distribution and Accumulation," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198233138, October.
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Cited by:
  1. Daniele Tavani, 2013. "Bargaining over productivity and wages when technical change is induced: implications for growth, distribution, and employment," Journal of Economics, Springer, Springer, vol. 109(3), pages 207-244, July.


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