Pareto Efficiency, Relative Prices, and Solutions to CGE Models
This paper analyzes Walrasian general equilibrium systems and calculates the static and dynamic solutions for competitive market equilibria. The Walrasian framework encompasses the basic multi-sector growth (MSG) models with neoclassical production technologies in N sectors (industries). The endogenous behavior of all relative prices and the sectorial allocation of the two primary factors (labor and capital) are analyzed in detail. The dynamic systems of Walrasian multi-sector economies and the family of solutions (time paths) for steady-state and persistent growth per capita are parametrically characterized. The technology parameters of the capital good industry are decisive for obtaining long-run per capita growth in closed (global) economies. Brief comments on the MSG literature are offered, together with short remarks on studies of industrial (structural) evolution and economic history.
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