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On intersectoral asymmetries in factors substitutability, "Equilibrium Production Possibility Frontiers" and the emergence of indeterminacies

  • Drugeon, Jean-Pierre

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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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 44 (2008)
Issue (Month): 3-4 (February)
Pages: 277-315

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Handle: RePEc:eee:mateco:v:44:y:2008:i:3-4:p:277-315
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Benhabib, Jess & Farmer, Roger E A, 1996. "Indeterminacy and Sector-specific Externalities," CEPR Discussion Papers 1403, C.E.P.R. Discussion Papers.
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  7. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
  8. Venditti, Alain, 1998. "Indeterminacy and endogenous fluctuations in two-sector growth models with externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 521-542, January.
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