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An Intertemporal Pasinettian Model with Government Sector

  • 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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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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  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. Vincenzo Denicolo' & Massimo Matteuzzi, 1989. "Public Debt and the Pasinetti Paradox," Working Papers 80, Dipartimento Scienze Economiche, Universita' di Bologna.
  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, vol. 13(1), pages 25-36, March.
  5. Baranzini, Mauro, 1991. "A Theory of Wealth Distribution and Accumulation," OUP Catalogue, Oxford University Press, number 9780198233138.
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