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Long‐period Positions in Multi‐sectoral C obb– D ouglas Economies
Author(s) -
Eichert Wolfgang
Publication year - 2014
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/meca.12038
Subject(s) - economics , returns to scale , wage , consumption (sociology) , profit (economics) , econometrics , parametrization (atmospheric modeling) , production (economics) , microeconomics , monetary economics , labour economics , physics , sociology , quantum mechanics , radiative transfer , social science
The present paper considers a constant returns to scale non‐joint production economy with one primary factor (labour). It follows from the non‐substitution theorem that macroeconomic variables are completely determined by the wage–profit distribution in a long‐period position. We investigate the special case in which production in each sector as well as consumption are characterized by means of C obb– D ouglas functions. Despite the non‐linearity, this parametrization allows us to compute sectoral and macroeconomic variables in simple and intuitive equations. As noted in earlier literature, many variables behave differently than would be expected on basis of a one‐sectoral Solow growth model.