The Government Sector in Kaldor–Pasinetti Models of Growth and Income Distribution

The Cambridge Equation with government activity revisited

“…Finally, it should be stressed that the government's decisions regarding the fi nancing of a budget defi cit through debt creation or issuing money fails to alter the essence of the Cambridge Equation. This result reinforces previous positions by Dalziel (1989), Pasinetti (1989aPasinetti ( ,1989b, Denicolò & Matteuzi (1990), Araujo (1992) and Teixeira (1999), who have shown that the validity of a version of the Cambridge Theorem is not limited to the case of balanced budget. NOTES 1.…”

“…However, a minor disagreement arose between those who defended the Cambridge Equation. On one side of the debate, Denicolò and Matteuzzi (1990), Dalziel (1991) and Araujo (1992) have argued that equation 1would also hold independently of government budget defi cits or surpluses. In short, the government's propensity to save does not matter when determining the rate of profi t, as argued by Pasinetti in expression (2).…”

Important contributions of the Cambridge Equation to the role of political economy: from Pasinetti to our days

“…On the other hand, we are having more shares of the fi rms but did not consider that the value per fi rm has increased, which means that the Financial System might be facing a crisis. Kaldor (1966), Lavoie (1998), Araujo (1995), Charles (2007) obtained the main results as presented in Lavoie (2014). First, they fi nd the profi t rate "Cambridge Equation" (equation 12), showing that the existence of the fi nancial market will make a decreasing impact on the profi t rate.…”

“…The bonds propose it was also presented by Dalziel (1991) when he considers a small close economy, showing how government titles affect the national income. These issues were also discussed by Araujo (1992), Teixeira (2009) and Araújo & Teixeira (2010), which seems to be close to the current economies since the evolution of the system and the consideration of an indirect tax and the actions of the government impact on the propensity to save of the capitalists and workers determining a formal model to discuss the existence of bonds in the economy.…”