Exercise 1: Nicolas Kaldor Post Keynesian Model Imagine a society with two social classes: capitalists and proletarians.

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Exercise 1 Nicolas Kaldor Post Keynesian Model Imagine A Society With Two Social Classes Capitalists And Proletarians 1 (179.4 KiB) Viewed 29 times

Exercise 1: Nicolas Kaldor Post Keynesian Model Imagine a society with two social classes: capitalists and proletarians. The capitalists own the capital, so together their income is equal to rK, where r is the Marginal Productivity of Capital and K is total physical capital. Furthermore, capitalists save a fraction sk of their income, while proletarians save nothing and consume all their income. Suppose further that there is no technological progress in this economy and that the production function is given by: F(K, L) = KºL 1-4, where L represents the total number of workers and grows at a rate equal to n. Solve what is requested in the following subsections. Hint: The differential equation of the capital variation is given in this case by: K = SkrK - SK 1. What is the steady state level of output per capita and capital per capita? 2. Calculate the rate of interest (called the rate of profit by Post Keynesians) in the steady state. The result is called the post-Keynesian Cambridge equation. The interesting thing is that Luigi Pasinetti showed that this result is valid even if workers are assumed to save, if their saving rate is lower than that of capitalists. 3. What is the golden rule rate sk that maximizes consumption per capita? 4. What is the saving rate sk that maximizes the per capita consumption of the capitalist class? Hint: Capitalist consumption per capita is equal to (1 - sk)rk