“Natural wages dynamics in a Ricardian growth model”

Abstract

Ricardian growth models are generally built on the assumption of a constant natural wage. Such an assumption conceals the fact that classical economists were aware that in growing economies workers' normal pattern of consumption steadily rise both in terms of quantity and quality. In the first part of the chapter we gather some classical hints on the relationship between economic growth and natural wages in order to provide a rational reconstruction of the classical point of view on natural wage dynamics. In the second part of the chapter we propose a formal analysis of the dynamics of a Ricardian model with endogenous natural wage