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Growth, Distribution, Stability and Government Budget Surplus: The Extended Cambridge Equation Revisited

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  • Joanílio Rodolpho Teixeira

    (University of Brasilia)

Abstract

In the late 80’s Pasinetti showed that the essential feature of the Cambridge Equation is preserved in his model of growth and income distribution with balanced or unbalanced budget. He did not work out both the share of incomes and the conditions of stability and was not formally concerned with a permanent budget surplus. The present paper deals with the case of a closed economy in which, besides direct taxation, indirect taxation on government’s own expenditures is explicitly considered and the government saves permanently at a given rate. The extended Cambridge Equation and the share of profits are obtained. It is also shown that the stability result requires additional assumptions. Boundary conditions are introduced and the long-run local stability result is attained, thus corroborating the generality and robustness of Pasinetti’s original insight.

Suggested Citation

  • Joanílio Rodolpho Teixeira, 2009. "Growth, Distribution, Stability and Government Budget Surplus: The Extended Cambridge Equation Revisited," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 10(2), pages 239-251.
    • Handle: RePEc:anp:econom:v:10:y:2009:i:2:239-251
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    References listed on IDEAS

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    More about this item

    Keywords

    Budget Surplus; Cambridge Equation; Growth; Distribution; Stability;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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