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Structural change and decisions on investment allocation

  • Araujo, Ricardo Azevedo
  • Teixeira, Joanilio Rodolpho

In this article the growth models of Feldman (1928) and Mahalanobis (1953) are extended to analyse the implications of the process of structural change on the decisions of investment allocation. By using the device of vertical integration, their constructions are shown to be a particular case of the Pasinetti’s (1981) model of structural change. Their analysis is then carried out in a multi-sector framework, where both productivity and demand change at a particular rate in each of the sectors. A particular rate of investment allocation for each sector is established subject to the full employment of the labour force. Following these lines, we are able to put some of the Halevi’s (1996) descriptive observations into a formal context and within this context to analyse and to extend his ideas about the role of demand on the decisions of investment allocation. Finally, an additional condition is added to the Pasinetti’s model in order to fully characterise the equilibrium path in the most general version of his framework, where capital goods are needed to produce capital goods.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 13 (2002)
Issue (Month): 2 (June)
Pages: 249-258

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Handle: RePEc:eee:streco:v:13:y:2002:i:2:p:249-258
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  1. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  2. Halevi, Joseph, 1996. "The significance of the theory of vertically integrated processes for the problem of economic development," Structural Change and Economic Dynamics, Elsevier, vol. 7(2), pages 163-171, June.
  3. Lavoie, M, 1995. "Pasinett's Vertically Hyper-Integrated Sectors and Natural Prices," Working Papers 9515e, University of Ottawa, Department of Economics.
  4. Weitzman, Martin L, 1971. "Shiftable Versus Non-Shiftable Capital: A Synthesis," Econometrica, Econometric Society, vol. 39(3), pages 511-29, May.
  5. Hishiyama, Izumi, 1996. "Appraising Pasinetti's structural dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 7(2), pages 127-134, June.
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