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A Generalisation and Simplification of the Cambridge Theorem with Budget Deficits

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  • Dalziel, Paul C

Abstract

Professor Luigi Pasinetti's 1989 paper on the Cambridge Theorem when the government operates steady-state budget deficits is generalized to model interest payments on public debt and on indirect tax on capital expenditure. It is shown that the Cambridge Theorem still applies in the two special cases considered by Pasinetti (an inflation tax or Ricardian equivalence can be applied), but also more generally when neither are present. Further, the analysis is simplified and made more transparent when the capital expenditure tax rate equals the indirect tax rate on consumption. In all cases, the burden of taxation falls on wages. Copyright 1991 by Oxford University Press.

Suggested Citation

  • Dalziel, Paul C, 1991. "A Generalisation and Simplification of the Cambridge Theorem with Budget Deficits," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 15(3), pages 287-300, September.
    • Handle: RePEc:oup:cambje:v:15:y:1991:i:3:p:287-300
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    Cited by:

    1. Javier López-Bernardo & Félix López-Martínez & Engelbert Stockhammer, 2016. "A Post-Keynesian Response to Piketty's ‘Fundamental Contradiction of Capitalism’," Review of Political Economy, Taylor & Francis Journals, vol. 28(2), pages 190-204, April.
    2. Massimiliano La Marca, 2005. "The Public Sector In A Model Of Growth And Distribution À La Pasinetti: Existence Of One‐ Or Two‐Class Economies," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 157-181, May.
    3. Javier López Bernardo & Engelbert Stockhammer & Félix López Martínez, 2016. "A post Keynesian theory for Tobin’s in a stock-flow consistent framework," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(2), pages 256-285, April.
    4. João Gabriel de Araujo Oliveira & Joanilio Rodolpho Teixeira, 2020. "A note reconsidering a post‐Keynesian model of growth and distribution in the globalization context," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 487-495, July.
    5. Khalid Saeed & Honggang Xu, 2013. "Infrastructure development as a policy lever for sustainable development," Chapters, in: M. A. Quaddus & M. A.B. Siddique (ed.), Handbook of Sustainable Development Planning, chapter 14, pages 322-356, Edward Elgar Publishing.
    6. Thomas I. Palley, 2013. "Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 79-104, January.

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