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Critique of the neoclassical theory of growth and distribution

  • Luigi L. Pasinetti

    (Universitˆ Cattolica del S.Cuore, Istituto di teoria economica e metodi quantitativi, Milano (Italy))

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    The paper surveys the main theories of income distribution in their relationship with the theories of economic growth. First, the Classical approach is considered, focusing on the Ricardian theory. Then the neoclassical theory is discussed, highlighting its origins (Bohm-Bawerk, Wicksell, Clark) and the role of the aggregate production function. The emergence of a "Keynesian" theory of income distributionin the wake of Harrod's model of growth is then recalled together with the surprising resurgence of the neoclassical theory (following the contributions of Solow and Meade). But, as the paper shows, the neoclassical theory of income distributionlacks logical consistency and has shaky foundations, as has been revealed by the severecritiques moved to the neoclassical production function. Mainstream economic literature circumvents this problem by simply ignoring it, while the models of endogenous growth exclude the issue of distribution theory from their consideration. However, while mainstream economics bypasses the problems of incomedistribution, this is too relevant an issue to be ignored and a number of new research lines, briefly surveyed, try new approaches to it.

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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9924/9806
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    Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

    Volume (Year): 53 (2000)
    Issue (Month): 215 ()
    Pages: 383-431

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    Handle: RePEc:psl:bnlaqr:2000:42
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    1. Pasinetti, Luigi L, 1969. "Switches of Technique and the "Rate of Return" in Capital Theory," Economic Journal, Royal Economic Society, vol. 79(315), pages 508-31, September.
    2. Atkinson, A-B, 1996. "Bringing Income Distribution in from the Cold," Economics Papers 117, Economics Group, Nuffield College, University of Oxford.
    3. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July.
    4. Pasinetti, Luigi L, 1978. " Wicksell Effects and Reswitchings of Technique in Capital Theory," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(2), pages 181-89, July.
    5. Robert M. Solow, 2000. "The neoclassical theory of growth and distribution," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 349-381.
    6. Hahn, Frank, 1982. "The Neo-Ricardians," Cambridge Journal of Economics, Oxford University Press, vol. 6(4), pages 353-74, December.
    7. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
    8. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
    9. repec:cup:cbooks:9780521297035 is not listed on IDEAS
    10. Labini, Paolo Sylos, 1995. "Why the interpretation of the Cobb-Douglas production function must be radically changed," Structural Change and Economic Dynamics, Elsevier, vol. 6(4), pages 485-504, December.
    11. Fisher, Franklin M, 1971. "Aggregate Production Functions and the Explanation of Wages: A Simulation Experiment," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 305-25, November.
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    13. Perotti, Roberto, 1992. "Income Distribution, Politics, and Growth," American Economic Review, American Economic Association, vol. 82(2), pages 311-16, May.
    14. Harcourt, G C, 1969. "Some Cambridge Controversies in the Theory of Capital," Journal of Economic Literature, American Economic Association, vol. 7(2), pages 369-405, June.
    15. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    16. Sato, Kazuo, 1974. "The Neoclassical Postulate and the Technology Frontier in Capital Theory," The Quarterly Journal of Economics, MIT Press, vol. 88(3), pages 353-84, August.
    17. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
    18. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    19. Baranzini, Mauro, 1991. "A Theory of Wealth Distribution and Accumulation," OUP Catalogue, Oxford University Press, number 9780198233138, March.
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