Volume 45 Number 179,
October - December 2014

Capital Accumulation and Income Distribution. An Alternative Theoretical Paradigm for Developing Countries, César Salazar, IIEC-UNAM, Probooks, 2012.

The main objective of this work is to propose and econometrically prove a theoretical paradigm able to explain growth and distribution in countries considerably lagging behind in industrialization.

The author presents an important study, making clear that few theories have sought to simultaneously explain investment and the factorial distribution of income, a phenomenon that directly reveals from where the resources that make accumulation possible are derived and how the negotiating power of each factor in the economic growth process can change.

The first section of the book consists of eight chapters, which, as is their main objective, analyze a variety of theoretical proposals to allow the author to build a new paradigm to explain capital accumulation and the factorial distribution of income in developing countries.

It is notable that from the very start, the author assumes certain premises that make the search for this paradigm so compelling:

  • Imperfect competition predominates in current capitalist economies.
  • Technological developments give innovative companies market power.
  • Technological innovations are mainly generated in developed countries.

The second chapter analyzes the works of Adam Smith, Kalecki and Schumpeter, explaining the idea of exogenous technological innovation and how they abandon the precepts of perfect market competition for products and distribution, based on marginal productivity, defining profit as the surplus above costs.

In the following chapter, the author considers the works of Joan Robinson and Josef Steindl, both of whom have rejected the ideas set forth in the second chapter, as they believe that technological innovation is more of an endogenous factor derived from the defensive nature of investment in monopolistic market structures.

Along the same lines of thinking and, of course, offering a rough outline of economic theory, the author uses the fourth chapter to study contributions from Kaldor and Alfred Eichner regarding technical change. Their works reveal that they discounted neoclassical assumptions by referring to technical change as an endogenous phenomenon, while also focusing on the distributive consequences of investment financing under conditions of imperfect competition.

Contributions from Toporowski and Tracy Mott demonstrate that accumulation is a portfolio decision, analyzing the distributional effects resulting from the very different behavior of the real and capital financial markets.

The sixth chapter offers a very relevant critique of recent models explaining investment decisions impacted by the institutional framework of the financial system, which, due to asymmetrical information, produces distortions reflected in the allocation of resources. It draws on the labor market segmentation theory to propose a new interpretation of the relationship between capital accumulation and income distribution, and analyzes income redistribution based on salary policy.

This first section closes with chapter eight, reviewing theses by Thirlwall and Juan Castaings, who included in this theoretical analysis external restrictions on growth and monetary weakness in developing countries. In the words of the author, nearly at the end of this introductory section, these topics are fundamental, precisely to build a new paradigm of capital accumulation and income distribution in these countries.

The second section of this work offers a brief explanation of the contribution of this author by summarizing and applying each of the proposals described in the first eight chapters. One of the most noteworthy parts of this second section is an explanation of the econometric approach used to empirically verify the research, as well as an explanation and development of the two working hypotheses.

Finally, it is useful to point out that the author never fails to mention throughout the book that some theories, such as growth and distribution theories, may be questionable or inapplicable in conditions of perfect, or imperfect, competition, whatever the case may be.

Along this same line of thinking, the book warns that in developing countries, where technological innovation may be slower, the secondary labor market is relatively larger. The immediate consequence of this is increased productivity, which translates into lower prices but also more precarious working conditions.

This book is a highly recommended read for its strong focus on economic theory. Undoubtedly, it is a fresh contribution regarding the economic conditions in which we currently live.

Santiago Hernández
Institute of Economic Research – unam

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Feb 23th, 2018.
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