Accumulation and Compensation Turnpikes in a Liontief Model
AbstractThe paper considers a model of an economy with after-effects: any production activity generates some subsequent expenses, like compensation of residual damages. Internalizing the after-effects in production costs at the time they are generated proves to substantially change the shape of long-term programs. It results from an interaction of two components corresponding to the conflicting goals: the fastest growth of production, and the most rapid decrease of residual damages. Each component has its own turnpike, so that the model has two dynamic equilibria. Respectively, shadow prices are a combination of two components: "accumulation prices" declining over time, and "compensation prices" that are growing. In some cases this may result in negative market interest rates.
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Bibliographic InfoPaper provided by Indiana - Center for Econometric Model Research in its series Papers with number 92-014.
Length: 46 pages
Date of creation: 1992
Date of revision:
Contact details of provider:
Postal: Indiana University, Center for Econometric Model Research, Department of Economics; Bloomington, IN 47405.
Web page: http://www.indiana.edu/~econweb/
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production ; economic models;
Other versions of this item:
- Kaganovich, Michael, 1996. "Accumulation and Compensation Turnpikes in a Leontief Model," Economic Theory, Springer, vol. 7(3), pages 463-90, April.
- Michael Kaganovich, 1996. "Accumulation and compensation turnpikes in a Leontief model (*)," Economic Theory, Springer, vol. 7(3), pages 463-490.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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