Growth, Distribution, Stability and Government Budget Surplus: The Extended Cambridge Equation Revisited
In the late 80’s Pasinetti showed that the essential feature of the Cambridge Equation is preserved in his model of growth and income distribution with balanced or unbalanced budget. He did not work out both the share of incomes and the conditions of stability and was not formally concerned with a permanent budget surplus. The present paper deals with the case of a closed economy in which, besides direct taxation, indirect taxation on government’s own expenditures is explicitly considered and the government saves permanently at a given rate. The extended Cambridge Equation and the share of profits are obtained. It is also shown that the stability result requires additional assumptions. Boundary conditions are introduced and the long-run local stability result is attained, thus corroborating the generality and robustness of Pasinetti’s original insight.
Volume (Year): 10 (2009)
Issue (Month): 2 ()
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- Pasinetti, Luigi L, 1989. "Ricardian Debt/Taxation Equivalence in the Kaldor Theory of Profits and Income Distribution," Cambridge Journal of Economics, Oxford University Press, vol. 13(1), pages 25-36, March.
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"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- 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.
- G. C. Harcourt, 1981. "Introduction," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 3(2), pages 155-157, January.
- Amit Bhaduri, 2008. "On the dynamics of profit-led and wage-led growth," Cambridge Journal of Economics, Oxford University Press, vol. 32(1), pages 147-160, January.
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