Cambridge distribution in a world economy

Abstract

The article outlines a two-country Cambridge model of growth and distribution. The condition for the Cambridge equation to apply to the world economy is outlined. When this is satisfied, a dual theorem holds in one of the two countries, and the country with the greater aggregate savings ratio is in current account surplus. The original Cambridge model was formulated as a means of equating the warranted and natural growth rates of both Harrod and Domar for the case of a closed economy. Thus, the world version is a method of satisfying Harrod's requirement that his model be capable of extension so as to include foreign trade.