Complex dynamics in a Pasinetti-Solow model of Growth and distribution

No 279, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: The one-sector neoclassical growth model (Solow, 1956,RES) can generate only simple dynamics. The dynamic properties of the Solow model follow from the saving behaviour and the neoclassical technology. As shown by Day (1982, AER), when average savings are allowed to vary, the discrete-time version of the Solow model may generate Chaos. Recently, BÃ¶hm and Kaas (2000, JEDC) investigate the dynamics of a discrete-time Solow model with different but constant saving propensities attached to factor shares, wages and profits, and a slightly more general technology than the neoclassical one. Their assumption on saving behaviour corresponds to that proposed by Kaldor (1956, RES). The Solow model so revised gives rise to complex dynamic behaviour. We study some of the properties of a discrete-time version of the two-class model of growth and distribution proposed by Pasinetti (1962, RES) and Samuelson and Modigliani (1966, RES) with a CES production technology. We consider two groups of agents, workers and capitalists. The first saves out of wages and profits by applying to these income sources different propensities to save. Capitalistsâ€™ saving originates only from capital income. The resulting model is two-dimensional. Differently from the one-dimensional model proposed by BÃ¶hm and Kaas, distributive processes occur not only between factor shares but also between the two groups existing in the economy. We identify through simulations a large variety of dynamic behaviours

Keywords: Growth; Endogenous Cycles; Income Distribution (search for similar items in EconPapers)
JEL-codes: E25 E32 O40 (search for similar items in EconPapers)
Date: Written 2004-08-11

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Working Paper: Complex dynamics in a Pasinetti-Solow model of growth and distribution (2005)
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