An Intertemporal Pasinettian Model with Government Sector

Joao Ricardo Faria and Ricardo Araujo
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Joao Ricardo Faria: School of Social Sciences, University of Texas at Dallas¡XRichardson, U.S.A.

International Journal of Business and Economics, 2004, vol. 3, issue 3, 257-268

Abstract: 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.

Keywords: intertemporal choice; factor income distribution (search for similar items in EconPapers)
JEL-codes: D33 D91 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (4)

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