The Classical Model of Growth and Distribution

Daniele Tavani

No 2311, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper provides a pedagogical introduction to the basic classical model of growth and distribution, building on Foley et al. (2019). Its distinctive features are: (a) the focus on class as a fundamental aspect of a capitalist economy; (b) the rejection of a neoclassical aggregate production function; and (c) the ability of the model to accommodate both a labor-abundant and a labor-constrained closure. I outline the main comparative statics of the model under both alternative closures. I then study in detail the cyclical dynamics around a labor-constrained equilibrium, that is the Goodwin (1967) model of the growth cycle. Finally, I discuss the role of workers’ savings, the Pasinetti (1962) paradox, and the implications for the distribution of wealth between classes. In the Appendix, I show how to derive a version of the labor-abundant closure through the generalized Nash (1950) solution to the bargaining problem, and briefly outline how to obtain a saving rule through intertemporal optimization.

Pages: 30 pages
Date: 2023-10
New Economics Papers: this item is included in nep-hme
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