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FACTOR‐INTENSITY REVERSALS UNDER MONOPOLISTIC COMPETITION *
Author(s) -
Torstensson Johan
Publication year - 1996
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.1996.tb00628.x
Subject(s) - monopolistic competition , economics , homothetic transformation , capital intensity , renting , competition (biology) , capital (architecture) , microeconomics , production (economics) , econometrics , mathematics , monopoly , profit (economics) , history , ecology , geometry , archaeology , political science , law , biology
This paper shows that it is impossible to rule out factor‐intensity reversals (FIRs) under monopolistic competition unless production functions are homothetic. We construct a simple example where the capital‐intensity at unchanged output is fixed, but where FIRs still can occur because equilibrium output and thus the average capital‐intensity depends on the wage‐rental ratio.