Factor Supply Changes in Small Open Economies: Rybczynski Derivatives under Increasing Marginal Costs
AbstractWe discuss the validity of Rybczynski’s theorem under increasing marginal costs within firms or industries. In particular, we show that an extra supply of any factor may lead to an expansion of all sector outputs if at least one sector permits input substitution. We provide a corresponding necessary and sufficient condition. This condition can even be satisfied when the equilibrium is Walrasian and Marshallian stable. Our findings are also robust with respect to aggregate improvements in total factor productivity which raise the economy’s outputs beyond private returns.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 22 (2009)
Issue (Month): 1 (Spring)
Find related papers by JEL classification:
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
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