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Allocation of investment in a new market economy

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  • Taradas Bandyopadhyay
  • Tapan Biswas

Abstract

In a simple two-sector open economy model with non-shiftable capital, which is akin to the new free market economies of east European countries, this paper shows that, for a certain configuration of capital stocks, a temporary price intervention results in a better allocation of investment. It is also established that the level of intervention shouldbe declining during the period in question.

Suggested Citation

  • Taradas Bandyopadhyay & Tapan Biswas, 1997. "Allocation of investment in a new market economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(3), pages 359-375.
    • Handle: RePEc:taf:jitecd:v:6:y:1997:i:3:p:359-375
    DOI: 10.1080/09638199700000021
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    References listed on IDEAS

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    1. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-791, October.
    2. Tapan Biswas, 2012. "Non-optimality of the Myopic Decision Rule: The Case of a Two-Sector Open Economy," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 4(1), pages 157-163, June.
    3. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    4. F. H. Hahn, 1966. "Equilibrium Dynamics with Heterogeneous Capital Goods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(4), pages 633-646.
    5. W. R. S. Sutherland, 1970. "On Optimal Development in a Multi-Sectoral Economy: the Discounted Case," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 37(4), pages 585-589.
    6. Hirofumi Uzawa, 1964. "Optimal Growth in a Two-Sector Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 31(1), pages 1-24.
    7. Karl Shell & Joseph E. Stiglitz, 1967. "The Allocation of Investment in a Dynamic Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 81(4), pages 592-609.
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    Cited by:

    1. Sokolovskyi, Dmytro, 2018. "The factors inefficient allocation of investment between economies," MPRA Paper 87032, University Library of Munich, Germany.

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