Contributions to Political Economy, Vol. 16, No. 1, pp. 61-86, 1997
research-article |
GOVERNMENT DEFICITS IN POST-KEYNESIAN THEORIES OF GROWTH AND DISTRIBUTION
Dipartimento di Scienze Economiche e Statistiche, Università di Napoli ‘Federico II’
Abstract
This paper examines the role of the government sector in post-Keynesian theories of growth and distribution. It shows the possibility of reconciling two views on income distribution, present in the post-Keynesian tradition, which the literature has considered alternative. By following Kaldor's suggestions on the role that monetary and fiscal policy can play in maintaining steady growth conditions, we find that distributive variables depend both on the rate of growth of the economy, as pointed out by Kaldor and Pasinetti, and on the money rate of interest, as suggested by Sraffa and by the subsequent elaborations of a monetary theory of distribution. The paper first verifies the validity of the Pasinetti theorem and the dual theorem, and shows that these theorems do not always hold when the government sector is explicitly considered. It extends the analysis to the case of the corporate economy and institutional distribution, clarifying limits to the neo-Pasinetti theorem related to the assumption of an endogenous valuation ratio in steady-growth equilibrium and to the fact that this theorem does not hold when real capital investment is also financed through the issue of firms' bonds.