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An Intertemporal Pasinettian Model with Government Sector

Author

Listed:
  • Joao Ricardo Faria

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

  • Ricardo Azevedo Araujo

    (Catholic University of Brasilia, Brazil)

Abstract

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.

Suggested Citation

  • Joao Ricardo Faria & Ricardo Azevedo Araujo, 2004. "An Intertemporal Pasinettian Model with Government Sector," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 3(3), pages 257-268, December.
    • Handle: RePEc:ijb:journl:v:3:y:2004:i:3:p:257-268
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    References listed on IDEAS

    as
    1. Baranzini, Mauro, 1991. "A Theory of Wealth Distribution and Accumulation," OUP Catalogue, Oxford University Press, number 9780198233138, Decembrie.
    2. 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.
    3. Denicolo, Vincenzo & Matteuzzi, Massimo, 1990. "Public Debt and the Pasinetti Paradox," Cambridge Journal of Economics, Oxford University Press, vol. 14(3), pages 339-344, September.
    4. João Ricardo Faria & Joanílio Rodolpho Teixeira, 1999. "Growth and stability in a model with Pasinettian saving behaviour and neoclassical technology," Manchester School, University of Manchester, vol. 67(1), pages 111-121, January.
    5. Steedman, Ian, 1972. "The State and the Outcome of the Pasinetti Process," Economic Journal, Royal Economic Society, vol. 82(328), pages 1387-1395, December.
    6. Panico, Carlo, 1997. "Government Deficits in Post-Keynesian Theories of Growth and Distribution," Contributions to Political Economy, Oxford University Press, vol. 16(0), pages 61-86.
    7. F. H. Fleck & C.-M. Domenghino, 1990. "Government Activity Invalidate the “Cambridge Theorem of the Rate of Profit”," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 12(3), pages 487-497, March.
    8. Paul A. Samuelson & Franco Modigliani, 1966. "The Pasinetti Paradox in Neoclassical and More General Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(4), pages 269-301.
    9. Luigi L. Pasinetti, 1966. "New Results in an Old Framework: Comment on Samuelson and Modigliani," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(4), pages 303-306.
    10. 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 111-121, January.
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    More about this item

    Keywords

    intertemporal choice; factor income distribution;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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