Joan Robinson’s Model of Growth
Mrs. Joan Robinson has given her model of growth in her classic book. ‘The Accumulation of Capital in 1956. Joan Robinson’s model clearly takes the problem of population growth in a developing economy and analyses the influence of population on the role of capital accumulation and growth of output.
In the words of Prof. Mathew, The relation between distribution and growth in this model arises partly from the mutual interdependence of the rate of profit and the pace of capital accumulation and partly from the effect of distribution of income on the proportion of income saved.
Assumptions
1. Labour and capital are the only productive factors. It implies that the national output is the result of combined efforts of these two factors of production.
2. The economy is assumed to be closed i.e., there is no foreign trade.
3. Total wage bill is the product of real wage rate and number of workers.
4. Total income is divided between capital and labour as these are the two factors of production.The production is not affected by the technological changes i.e. there is no progress in technology.
6. Total profit is the product of profit rate and amount of capital invested.
7. There is constancy in price level.
8. Wage earners spend all of their wage income on consumption, while profit takers save and invest all of their profit income.
9. Capital and labor are combined in a fixed proportion for a given output.
10. The national income is the sum of wage bill and total profits.
11. There is no scarcity of labor and entrepreneurs can employ as much labor as they wish.
12. Entrepreneurs consume nothing but save and invest their entire income for capital formation. If they have no profits, there is no accumulation and if they do not accumulate, they have no profits.
Open Model
In an open economy, the conditions for the steady growth and conditions for rising rate of capital accumulation will be discussed. According to Mrs. Joan Robinson, national income is the sum of the total wage bill and total profit. Total wage bill is the real wage multiplied by the number of workers and total profits are equal to profit rate multiplied by the amount of capital. This relationship can be expressed as under:
Closed Model
Conclusion
In golden age, the initial conditions are appropriate to steady growth. In limping golden ages, the actual realization growth rate is limited only by the desired rate.
In a bastard golden age, the possible rate is limited in a different way i.e., by real wages at the tolerable minimum. Both in a limping golden age and a bastard golden age, the stock of capital in existence at any moment is less than sufficient to offer employment to all available labour. In the limping golden age, the stock of equipment is not growing faster for lack of animal spirits.
In a restrained golden age, the realised growth rate is limited by the possible rate and
kept down to it. In the bastard age, it is not growing faster because it is blocked by inflation barrier. In platinum ages, the initial conditions do not permit steady growth and the rate of accumulation is accelerating or decelerating as the case may be.