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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.
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    3. 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.
    4. 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..
    5. 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.
    6. 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.
    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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