On the relation between savings,distribution and inflation

A model of inflation, distribution and savings analysed by Thirlwall is evaluated. We replace the Kaldor saving function, instead following Pasinetti, where capitalists’ and workers’ savings are assumed proportional to their respective incomes. With this formulation, estimates of the inflation required to change the overall savings rate are generally larger than Thirlwall's. The magnitude of the difference is related, inter alia, to the share of capitalists’ profits in total income. Alternative estimates are presented, and it is shown that in general very large inflation changes are required to raise savings through redistribution. We also discuss the empirical evidence on the value of the wage adjustment parameter in the models.