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THE ROLE OF SUBSTITUTION IN WICKSELL'S DURABLE CAPITAL MODEL
Author(s) -
Hong Keehyun
Publication year - 1995
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1995.tb00382.x
Subject(s) - economics , capital good , substitution (logic) , capital (architecture) , production (economics) , marginal product of capital , sign (mathematics) , consumption (sociology) , value (mathematics) , stock (firearms) , durable good , microeconomics , marginal product , factors of production , profit (economics) , capital formation , public good , financial capital , mathematics , engineering , computer science , mechanical engineering , mathematical analysis , social science , statistics , archaeology , sociology , history , programming language
In this paper the author shows that the absence of a good which is used directly or indirectly for the production of other goods is a crucial feature of Wicksell's two‐sector model, without which a positive relation between the value of machine stock and the consumption good output cannot be guaranteed. In fact he proves that, if that model is generalised by assuming that the capital good is used as an input also in its own production, the sign of the “marginal product of social capital” is indeterminate, even when both sectors have “well‐behaved” production functions of a Cobb‐Douglas type.