Piketty in the light of Pasinetti and Foley: Income distribution, economic growth and financial fragility

Vol. 36 No. 4 (2016)

Oct-Dec / 2016
Published October 1, 2016
PDF-English
PDF-English

How to Cite

Dávila-Fernández, Marwil, and José Luis Oreiro. 2016. “Piketty in the Light of Pasinetti and Foley: Income Distribution, Economic Growth and Financial Fragility”. Brazilian Journal of Political Economy 36 (4), 667-83. https://doi.org/10.1590/0101-31572015v36n04a01.

Piketty in the light of Pasinetti and Foley: Income distribution, economic growth and financial fragility

Marwil Dávila-Fernández
Mestrando em Economia pelo programa de pós-graduação no Centro de desenvolvimento e Planejamento Regional (Cedeplar/UFMG),
José Luis Oreiro
Professor do Instituto de Economia da Universidade Federal do Rio de Janeiro,
Brazilian Journal of Political Economy, Vol. 36 No. 4 (2016), Oct-Dec / 2016, Pages 667-683

Abstract

The paper discusses the hypothesis that the functional distribution of income is not necessary stable along the growth path of a capitalist economy. We reviewed Pasinetti and Foley models showing that if we use the traditional definition of capital, i.e. capital as the value of productive resources (i) r>g is a necessary condition for the existence of balanced growth, and it will not lead to an explosive process of income concentration and (ii) r>i is a necessary condition for a financially robust growth path. Thus we conclude that from a post- Keynesian perspective, Piketty's argument that the root of the increase of inequality in capitalism is that the capital return rate is higher than the growth rate of the economy is wrong.

JEL Classification: E11; E12; E25.


Keywords: Economic growth, Capital, Income distribution, Post-keynesian economics, Thomas Piketty