Joan Robinson's Growth Model is a simple model of

economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...

, reflecting the working of a pure capitalist economy, expounded by

Joan Robinson Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics. B ...

in her 1956 book ''The Accumulation of Capital''. However, ''The Accumulation of Capital'' was a terse book. In a later book, ''Essays in the theory of Economic Growth'', she tried to lower the degree of abstraction. Robinson presented her growth model in verbal terms. A mathematical formalization was later provided by Kenneth K. Kurihara. Assumptions: # There is a

laissez-faire ''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...

closed economy Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems. Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especially ...

. # The factors of production are capital and labour only. # There is neutral technical progress. # There are only two classes: workers and capitalists, among whom the national income is distributed. # Workers save nothing and spend their wage income on consumption. # Capitalists consume nothing, but save and invest their entire income for capital formation. # There is no change in the price level. # Saving is a function of profit.

The model

The entrepreneurs’ total profit and the workers’ total wage bill constitute the net national income. It can be mathematically expressed as

p Y = w N +\pi p K

where ''Y'' is the net national income, ''w'' is the money wage rate, ''N'' is the number of workers employed, ''K'' is the amount of capital utilized, ''p'' is the average price of output as well as of capital and ''π'' is the gross profit rate.The above equation indicates that the profit rate is a functional of labour productivity (p)and real wage rate(w/p)and capital ratio.

The model

References

Further reading