Answer to Question #80317 in Macroeconomics for Aakash kumar badal

Question

What is John Robinson's growth deals rule?

Answer 1

In this model Joan Robinson relates investment with the rate of profit which in turn depends upon the distribution of income between wages and profits on the one hand and labour productivity and capital intensity on the other.
The entrepreneurs total profit and the workers total wage bill constitute the Net National Income in Joan Robinson's Growth Model. It can be mathematically expressed as
pY=wN+πpK
where Y is the net national income, w is the money wage rate, N 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 (including the rate).
Assumptions of the model:
1. There is a laissez-faire closed economy.
2. The factors of production are capital and labour only.
3. There is neutral technical progress.
4. There are only two classes: workers and entrepreneurs among whom the national income is distributed.
5. Workers save nothing and spend their wage income on consumption.
6. Entrepreneurs consume nothing, but save and invest their entire income for capital formation.
7. There is no change in the price level.
8. Saving is a function of profit.