SOME OPTIMAL ASPECTS IN A TWO CLASS GROWTH MODEL WITH A DIFFERENTIATED INTEREST RATE

Abstract

This paper explores the consequences of the rejection of the hypothesis of the equality between the profit rate and the interest rate in a two class model of economic growth. With a differentiated interest rate, the well-known (Pasinetti's) independence of the equilibrium profit rate with respect to the propensity to save of the workers is no longer valid. The general solution of the model for this case is given. Looking at optimal growth, the present paper develops two distinct arguments. First, in a traditional manner, the conditions under which there exists an interest rate which maximizes per capita consumption are established. Second, in a more original way, the usual criterion of optimal growth is replaced by the criterion of maximum workers' consumption, a not unreasonable criterion in a two-class economy. The maximizing conditions for this case are derived.

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