Conditions of Existence of a Two Class Economy in the Kaldor and More General Models of Growth and Income Distribution

Luigi L. Pasinetti

Kyklos, 1983, vol. 36, issue 1, 91-102

Abstract: The author considers the vexed question of whether it is meaningful, or logically consistent, to assume different savings propensities for profits and wages, independently of whether the savers are capitalists or workers. The author claims, however, that the analytical issues must be clarified first of all. Therefore he explores the conditions of existence of a two‐class (capitalists and workers) economy when the rate of interest i is lower than (or at most equal to) the rate of profit r, and the savings function is expressed in the general form: S = sww+ swcPw+ ScPc It is shown that, at one extreme, when Swc= Se, the savings function reduces to the one originally used by Kaldor, and, if also i = r, no equilibrium path exists. At the other extreme, when Swc= Sww, the savings function reduces to the one originally used by Pasinetti and the range of existence of a two‐class economy is maximum. In between the two extremes, ranges of existence are defined in terms of inequalities involving the parameters of the system.

Date: 1983
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