TITLE:
Income Distribution and Growth in Leontief’s Closed Model
AUTHORS:
Alberto Benítez Sánchez
KEYWORDS:
Income Distribution, Leontief’s Closed Model, Sraffa’s Standard Commodity, von Neumann’s Balanced-Growth Path
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.1,
January
19,
2016
ABSTRACT: While the routine use of Leontief’s closed model is limited to the case
in which the whole income of an economy goes to wages, this paper shows that
the model also permits the representation of production programs corresponding
to every level of income distribution between wages and profits. In addition,
for each of these programs, the model allows calculating the price system and
the profit rate when this rate is the same in all industries. Thus, the results
obtained in Sraffa’s surplus economy are established following an alternative
way, this makes it possible to build a particular standard system for each
level of income distribution between wages and profits. Besides, the fact that
the model includes the set of households as a particular industrial branch permits
to build a balanced-growth path of the economy in which the quantities of work
used in each industry as well as the goods consumed by the workers are studied
explicitly, unlike what happens in von Neumann’s model. The paper also shows
that, under a weak assumption, the balanced-growth rate is independent of the
worker’s choice.