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Land Rents and Competitive Equilibrium

Author

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  • Martin Diedrich

    (Department of Economics Keele University)

Abstract

We study the technological pre-conditions for competitive equilibrium in a multisectoral economy where land is an essential imput. Earlier results by Bidard and Salvadori require either very low interest rates or are unable to predict the type of final demand vectors that can be supported by an equilibrium.We extend these earlier results and show that a given level and structure of final demand can be supported by equilibrium prices if there is a sufficiently strong substitution potential between labour and land inputs. Our proof is constructive: the equilibria we discuss can be computed by the Lemke Complementary Pivoting Algorithm.

Suggested Citation

  • Martin Diedrich, 2000. "Land Rents and Competitive Equilibrium," Keele Department of Economics Discussion Papers (1995-2001) 2000/19, Department of Economics, Keele University, revised Mar 2001.
    • Handle: RePEc:kee:keeldp:2000/19
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/0019.pdf
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    Keywords

    Multisectoral Growth Theory; Choice of Technique; Land Rent; Linear Complementarity Theory; Lemke Algorithm;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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