NATURAL WAGE DYNAMICS IN A RICARDIAN GROWTH MODEL

[Ricardo] retained the important operative principle that in any given social and cultural environment there is a “natural rate of wages ” at which alone population could remain stationary and from which wages can only deviate temporarily. The hypothesis of an infinitely elastic supply curve of labour thus did not necessarily imply that this supply price must be equal to the bare minimum of subsistence. Yet this assumption was inconsistent with another (implied) feature of his model discussed below, that wages are not only fixed in terms of “corn ” but are enterely (or almost entirely) spent on corn. (Kaldor 1956, p. 85 footnote 1, first emphasis is ours). I