Growth and stability in a model with Pasinettian saving behaviour and neoclassical technology

João Ricardo Faria and Joanílio Rodolpho Teixeira

Manchester School, 1999, vol. 67, issue 1, 111-121

Abstract: We analyse a Kaldor–Pasinetti two‐class model of growth and distribution in which fiscal activity is explicitly introduced along the lines of Pasinetti (‘Ricardian Debt/Taxation Equivalence in the Kaldor Theory of Profits and Income Distribution’, Cambridge Journal of Economics, Vol. 13 (1989), pp. 25–36). Following the approach of Darity (‘A Simple Analytics of Neo‐Ricardian Growth and Distribution’, American Economic Review, Vol. 71 (1981), pp. 978–993) the model is reduced to a dynamic system where the Cambridge equation is one of the possible steady‐state solutions. The conditions for its local stability are studied and a numerical example is presented. The anti‐dual case is more likely to occur in order to guarantee the local stability of the Cambridge equation.

Date: 1999
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