# Assessing the practicability of the condition used for dynamic equilibrium in Pasinetti theory of distribution

**Authors:** A Jayakrishnan, Anil Lal S  
**arXiv:** [2104.05229](https://arxiv.org/abs/2104.05229)  
**Date:** 2021-04-12  
**Summary page:** https://www.summarizepaper.com/en/paper/2104.05229v1/

## Key points

- The paper assesses the practicability of the condition used for dynamic equilibrium in Pasinetti theory of distribution.
- The authors examine the condition \(K_w/K=S_w/S\) and its interpretation to Pasinetti's theory of distribution, which enforces the result \(s_w\rightarrow0\) as \(P_w\rightarrow 0\).
- Pasinetti's claim that long-run worker propensity to save does not influence income distribution between profits and wages cannot be generalized. This claim is only valid when \(W>>P_w\) or \(P_w=0\) with \(W\ne0\).
- The practical implementation of Pasinetti's condition imposes a restriction on actual savings by one agent to a lower level compared to its full saving capacity.
- An implied relationship between propensities to save by workers and capitalists shows that the Passineti's condition can be practiced only through a contract for a constant value of \(R=s_w/s_c\), agreed upon between workers and capitalists.
- The authors demonstrate that this approach may lead to accumulation of unsaved income, reduce growth of capital, and is not warranted.
- They also present simple mathematical steps for deriving Pasinetti's final equation compared to those presented in \cite{pasinetti1962rate}.
- Overall, this paper provides an insightful assessment into the practicability of Pasinetti's theory of distribution and its implications on economic growth. It highlights potential limitations in implementing his conditions and suggests alternative approaches for achieving dynamic equilibrium in economic growth.

## Summary

This paper assesses the practicability of the condition used for dynamic equilibrium in Pasinetti theory of distribution. The authors examine the condition \(K_w/K=S_w/S\) and its interpretation to Pasinetti's theory of distribution, which enforces the result \(s_w\rightarrow0\) as \(P_w\rightarrow 0\). This result describes the behavior of workers according to Pasinetti. However, the authors find that Pasinetti's claim that long-run worker propensity to save does not influence income distribution between profits and wages cannot be generalized. This claim is only valid when \(W>>P_w\) or \(P_w=0\) with \(W\ne0\). The practical implementation of Pasinetti's condition imposes a restriction on actual savings by one agent to a lower level compared to its full saving capacity. An implied relationship between propensities to save by workers and capitalists shows that the Passineti's condition can be practiced only through a contract for a constant value of \(R=s_w/s_c\), agreed upon between workers and capitalists. The authors demonstrate that this approach may lead to accumulation of unsaved income, reduce growth of capital, and is not warranted. They also present simple mathematical steps for deriving Pasinetti's final equation compared to those presented in \cite{pasinetti1962rate}. Overall, this paper provides an insightful assessment into the practicability of Pasinetti's theory of distribution and its implications on economic growth. It highlights potential limitations in implementing his conditions and suggests alternative approaches for achieving dynamic equilibrium in economic growth.