On Intersectoral Asymmetries in Factors Substitutability “Equilibrium Production Possibility Frontiers” and the emergence of indeterminacies
AbstractThe 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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Date of creation: Feb 2008
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Publication status: Published, Journal of Mathematical Economics, 2008, 44, 3-4, 277-315
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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;
Other versions of this item:
- Drugeon, Jean-Pierre, 2008. "On intersectoral asymmetries in factors substitutability, "Equilibrium Production Possibility Frontiers" and the emergence of indeterminacies," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 277-315, February.
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