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Piketty in the light of Pasinetti and Foley: Income distribution, economic growth and financial fragility

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  • Marwil Dávila-Fernández
  • José Luis Oreiro

Abstract

The paper discusses the hypothesis that the functional distribution of income is not necessary stable along the growth path of a capitalist economy. We reviewed Pasinetti and Foley models showing that if we use the traditional definition of capital, i.e. capital as the value of productive resources (i) r>g is a necessary condition for the existence of balanced growth, and it will not lead to an explosive process of income concentration and (ii) r>i is a necessary condition for a financially robust growth path. Thus we conclude that from a post- Keynesian perspective, Piketty's argument that the root of the increase of inequality in capitalism is that the capital return rate is higher than the growth rate of the economy is wrong. JEL Classification: E11; E12; E25.

Suggested Citation

  • Marwil Dávila-Fernández & José Luis Oreiro, 2016. "Piketty in the light of Pasinetti and Foley: Income distribution, economic growth and financial fragility," Brazilian Journal of Political Economy, Center of Political Economy, vol. 36(4), pages 667-683.
    • Handle: RePEc:ekm:repojs:v:36:y:2016:i:4:p:667-683:id:201
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    More about this item

    Keywords

    Economic growth; Capital; Income distribution; Post-keynesian economics; Thomas Piketty;
    All these keywords.

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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