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Persistence of Dualism in a Closed Economy
Author(s) -
Gangopadhyay Shubhashis
Publication year - 1998
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00025
Subject(s) - economics , prosperity , dualism , hierarchy , homogeneous , capital (architecture) , returns to scale , distribution (mathematics) , general equilibrium theory , persistence (discontinuity) , income distribution , economy , microeconomics , monetary economics , market economy , inequality , production (economics) , mathematics , mathematical analysis , philosophy , geotechnical engineering , archaeology , epistemology , combinatorics , engineering , history , economic growth
The paper builds a two‐sector general‐equilibrium model, with one homogeneous and one differentiated good. The differentiated good has increasing returns to scale. Preferences are nonhomothetic with a hierarchy of wants. Income distribution is determined by the ownership of inputs and endogenous factor prices. The equilibrium properties are derived. Capital accumulation without any change in ownership pattern generates enclaves of prosperity, leaving large sections of the economy unaffected. The comparative static results are interpreted in the light of the experiences of closed, developing economies, like India.