This paper aims to give a possible mathematical formalization of economic efficiency in an economy concerned with attaining acceptable levels of per capita consumption of basic goods, subject to economic and social welfare constraints. This model was constructed as an underlying mathematical economic structure of Latin American world model of Fundacion Bariloche. It has been used in a modified form, as a feasibility study of possible growth paths id such underdeveloped economies. The model has a methodological intersection with the theory of optimal economic growth, and that the efficient growth paths are solutions of a constrained optimization problem: they optimize a social welfare criterion satisfying constraints given by a set of differential equations with initial values. In the usual optimal growth models these differential equations represent production-investment-consumption relations through time, formalizing a trade-off between present and future consumption (more present consumption implies less present investment). Here in addition, the admissible paths also satisfy a differential equation which relates the rate of population growth to the level of consumption of basic goods (a proxy standard of living) which introduces further relationships between present and future consumption. The admissible paths are assumed to satisfy additional requirements per capita consumption of all basic goods must be non-decreasing throughout time. This is a welfare consideration for countries with low levels of consumption. A brief description of the dynamics of the model in sequential form can be given as follows. Initial values of production, consumption, and investment in three basic sectors are given (nutrition, housing, health and education), and in a fourth sector of services and consumption foods complementary to the production and consumption of the three basic goods.
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
7980.
Length: Date of creation: 29 Nov 1976 Date of revision:
14 Mar 1977 Publication status: Published in Applied Mathematical Modelling no. 6.1(1977): pp. 290-297 Handle: RePEc:pra:mprapa:7980
Find related papers by JEL classification: I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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