Piketty in the light of Pasinetti and Foley: Income distribution, economic growth and financial fragility* * Both authors would like to thank the suggestions and comments made by Luiz Carlos Bresser-Pereira and Lionello Punzo, as also the useful comments made by two anonymous referees of Brazilian Journal of Political Economy. The usual disclaimers apply. Financial support of the National Scientific Council (CNPq) is also gratefully acknowledged.

Piketty à luz de Pasinetti e Foley: Distribuição de renda, crescimento balanceado e fragilidade financeira

MARWIL J. DÁVILA-FERNÁNDEZ JOSÉ LUIS OREIRO About the authors

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.

KEYWORDS:
economic growth; Capital; Income distribution; Post-keynesian economics; Thomas Piketty

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