Size matters: wealth accumulation and conflict in a Classical-Post-Keynesian framework

Vinicius Curti Cicero () and Gilberto Tadeu Lima ()

No 2026_28, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The Pasinetti irrelevance theorem was derived under the assumption that the rate of return on capital owned by workers but operated by capitalists equals the economy-wide rate of profit. A subsequent literature relaxed the equality, but left the differential exogenously given. This paper makes its determination the object of the theory: the wedge between the rate of return on worker-owned capital and the economy-wide rate of profit is set by a contested exchange in which capitalist bargaining power flows from the operational control exercised over production. The resulting framework recovers the canonical Pasinetti structure as the zero-wedge boundary case of a Classical surplus-approach closure. When the wedge is positive, workers' saving propensity enters the determination of long-run capital and output growth, the long-run equilibrium wealth distribution emerges as the joint outcome of saving behaviour and the institutional terms of the class-conflictual appropriation of the profits generated by worker-owned capital, and a higher capitalist appropriation rate raises long-run growth, though by less than the diversion of income towards the higher-saving class would alone deliver. Allowing the wedge to depend on the wealth distribution - so that capitalist bargaining power rises with the relative size of capital wealth they control - carries these results into a setting where the institutional efficiency of the wealth-to-power conversion becomes itself a determinant of long-run capital wealth concentration. The framework thereby identifies a redistributive lever the inherited tradition did not theorise: institutional protections on the terms of that operation reduce the long-run equilibrium wealth share capitalists can sustain.

Keywords: Wealth inequality; contested exchange; distributive conflict; Pasinetti theorem; theory of distribution (search for similar items in EconPapers)
JEL-codes: D31 E11 E25 (search for similar items in EconPapers)
Date: 2026-09-16
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