Growth and income distribution in an economy with dynasties and overlapping generations

Hiroaki Sasaki

Evolutionary and Institutional Economics Review, 2022, vol. 19, issue 1, No 10, 215-238

Abstract: Abstract By building a growth model with two classes–workers and capitalists–this study investigates the existence and stability of the long-run equilibrium along the lines of Pasinetti (Rev Econ Stud 29:267–279, 1962) and Samuelson and Modigliani (Rev Econ Stud 33:269– 301, 1996), and examines the dynamics of income distribution. Unlike preceding studies in which the propensity to save of each class is exogenously given, this study assumes that workers solve a two-period overlapping generations (OLG) model, while capitalists solve an infinite-horizon dynamic optimization model. Depending on the combinations of both classes’ time preference rates, parameter of the production function, population growth rate, technological progress rate, and depreciation rate, we obtain two kinds of long-run equilibria: the Pasinetti steady state and the dual steady state as per Samuelson–Modigliani. We show that under realistic values of the parameters, the economy is likely to converge to the Pasinetti steady state. Moreover, by using numerical simulations, we show that a decrease in economic growth rate increases the wealth share of capitalists while decreasing that of workers, and that it increases (decreases) the income share of capitalists while it decreases (increases) that of workers if income share is measured in terms of gross (net) income share.

Keywords: Workers and capitalists; Intertemporal optimization; Pasinetti steady state; Dual steady state (search for similar items in EconPapers)
JEL-codes: E13 E21 E25 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s40844-021-00206-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:eaiere:v:19:y:2022:i:1:d:10.1007_s40844-021-00206-4

Ordering information: This journal article can be ordered from
https://www.springer ... theory/journal/40844

DOI: 10.1007/s40844-021-00206-4

Access Statistics for this article

Evolutionary and Institutional Economics Review is currently edited by Kiichiro Yagi, Yuji Aruka and Takahiro Fujimoto

More articles in Evolutionary and Institutional Economics Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().