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On Intersectoral Asymmetries in Factors Substitutability “Equilibrium Production Possibility Frontiers” and the emergence of indeterminacies

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  • Jean-Pierre Drugeon

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

The existence of asymmetries in factors substitutability between the distinct sectors of a given economy will directly rule the influence that spillover effects have upon its determinacy properties. For leading intersectoral spillover effects, the substitutability of the capital good industry together with a potential relative profit shares reversal—itself conditional to the existence of asymmetries between the intrasectoral and intersectoral spillover effects of at least one sector—between the private and the equilibrium level will, e.g., be at the core of the area for local indeterminacies. This proceeds from external dimensions which do not modify the constant returns to scale hypothesis that is retained at the decentralised level of the firm as they directly relate to equilibrium factors costs and outputs prices. The generality of the current approach and the genericity of the associated production set enlighten the role of the irregularities that prevail across the substitutability properties of the various sectors of a given economy but also, in the same vein, of the occurrence of heterogeneities between the intrasectoral and intersectoral spillovers emanating from a given industry, this gap being in turn weighted by the substitutability properties of this industry. It is shown that these multiplicity conclusions directly result from unusual properties of the Equilibrium Production Possibility Frontier that formulate as the occurrence of an equilibrium complementarity between the two outputs.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00182205.

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Date of creation: Feb 2008
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Publication status: Published, Journal of Mathematical Economics, 2008, 44, 3-4, 277-315
Handle: RePEc:hal:cesptp:hal-00182205

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Keywords: Equilibrium Production Possibility Frontiers; Intersectoral asymmetries in factors substitutability and between Price related intrasectoral and intersectoral spillovers; Irrelevance of returns to scale for local or global indeterminacies; Equilibrium complementarities between the outputs in a world of heterogeneous goods;

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  1. Benhabib, Jess & Nishimura, Kazuo, 1983. "Competitive Equilibrium Cycles," Working Papers, C.V. Starr Center for Applied Economics, New York University 83-30, C.V. Starr Center for Applied Economics, New York University.
  2. Benhabib, Jess & Farmer, Roger E.A., 1996. "Indeterminacy and Sector-Specific Externalities," Working Papers, C.V. Starr Center for Applied Economics, New York University 96-12, C.V. Starr Center for Applied Economics, New York University.
  3. Kazuo Nishimura & Jess Benhabib & Alain Venditti, 2002. "Indeterminacy and cycles in two-sector discrete-time model," Economic Theory, Springer, Springer, vol. 20(2), pages 217-235.
  4. Venditti, A., 1996. "Indeterminancy and Endogenous Fluctuations in Two-Sector Growth Models with Externalities," G.R.E.Q.A.M., Universite Aix-Marseille III 96a04, Universite Aix-Marseille III.
  5. Grandmont, Jean-Michel & Pintus, Patrick & de Vilder, Robin, 1998. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Journal of Economic Theory, Elsevier, Elsevier, vol. 80(1), pages 14-59, May.
  6. Cazzavillan, Guido & Lloyd-Braga, Teresa & Pintus, Patrick A., 1998. "Multiple Steady States and Endogenous Fluctuations with Increasing Returns to Scale in Production," Journal of Economic Theory, Elsevier, Elsevier, vol. 80(1), pages 60-107, May.
  7. Michele Boldrin & Aldo Rustichini, 2010. "Growth and Indeterminacy in Dynamic Models with Externalities," Levine's Working Paper Archive 1382, David K. Levine.
  8. Nishimura, K. & Venditti, A., 2000. "Dynamical Systems Arising from Infinite Time Horizon Optimization Models," G.R.E.Q.A.M., Universite Aix-Marseille III 00c03, Universite Aix-Marseille III.
  9. Benhabib, J. & Meng, Q. & Nishimura, K., 1999. "Indeterminacy Under Constant Returns to Scale in Multisector Economies," Working Papers, C.V. Starr Center for Applied Economics, New York University 99-17, C.V. Starr Center for Applied Economics, New York University.
  10. Kazuo Nishimura & Alain Venditti, 2006. "Indeterminacy in discrete-time infinite-horizon models," Working Papers, HAL halshs-00410763, HAL.
  11. Benhabib, Jess & Nishimura, Kazuo, 1979. "The hopf bifurcation and the existence and stability of closed orbits in multisector models of optimal economic growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 21(3), pages 421-444, December.
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Cited by:
  1. Paulo Brito & Alain Venditti, 2009. "Local and global indeterminacy in two-sector models of endogenous growth," Working Papers, HAL halshs-00408018, HAL.
  2. Wong, Tsz-Nga & Yip, Chong K., 2010. "Indeterminacy and the elasticity of substitution in one-sector models," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(4), pages 623-635, April.

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