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The Classical Model of Growth and Distribution

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  • Daniele Tavani

    (Department of Economics, Colorado State University, USA)

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.

Suggested Citation

  • Daniele Tavani, 2023. "The Classical Model of Growth and Distribution," Working Papers 2311, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:2311
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    File URL: http://www.economicpolicyresearch.org/econ/2023/NSSR_WP_112023.pdf
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    References listed on IDEAS

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