The Wage Fund Theory and the Gains from Trade in a Dynamic Ricardian Model

Sugata Marjit and Noritsugu Nakanishi

No 9218, CESifo Working Paper Series from CESifo

Abstract: This paper explores the role of wage fund as the basic source of credit, capital or finance in a dynamic Ricardian model, which consists of three classes of agents: the workers, the capitalist, and the producers of goods. We introduce and develop an elaborate dynamic wage fund model in the context of contemporary economic theory. The modified golden rule can be derived based on a mechanism significantly different from the standard Ramsey-Cass-Koopmans optimal growth framework. We also show that, although international trade in a static setting in the wage fund framework has real asymmetric distributional effects on the welfare of the agents just like the Stolper-Samuelson theorem, those asymmetric distributional impacts are nullified in the dynamic setting. In fact, trade liberalization is Pareto improving along the balanced growth path.

Keywords: wage fund; Ricardo model; modified golden rule; gains from trade; balanced growth path (search for similar items in EconPapers)
JEL-codes: B12 B17 F10 F43 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-int and nep-isf
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9218

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