The Public Sector in a Model of Growth and Distribution Pasinetti : Existence of One- or Two-Class Economies

This paper explores the implications of different regimes of taxation and fiscal policies on the existence of a one- or two-class economy in the Kaldor-Pasinetti approach of growth and income distribution. A simple model and its diagrammatical representation provide a complete taxonomy of the possible steady state equilibria and synthesize some early and recent contributions. It shows that the distribution among factors and the personal distribution among socio-economic classes depend on the fiscal policy of the government, the behavioural parameters of actors and technology; but, provided that some conditions are fulfilled, the Cambridge Theorem and its distributional implications hold