Premium
KALDORIAN DEMAND FUNCTIONS AND THE RETURN TO CAPITAL: AN ANALYSIS IN A TRADE THEORETIC FRAMEWORK
Author(s) -
Agarwal Manmohan,
Hazari Bharat R.
Publication year - 2009
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2009.00438.x
Subject(s) - economics , investment (military) , capital (architecture) , proposition , rate of return , macroeconomics , econometrics , monetary economics , microeconomics , finance , philosophy , archaeology , epistemology , politics , political science , law , history
. This paper shows that under certain plausible conditions capital accumulation raises the return to capital. A three good trade theoretic model with Kaldorian demand functions is used to establish this result. This proposition is also independent of the assumption of diminishing return to capital a key feature of endogenous growth theory. Our result sheds light on the high rates of investment and growth that many East Asian economies have achieved.