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Regularities in Prices of Production and the Concentration of Compositions of Capitals

Author

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  • Luis Daniel Torres Gonzalez

    (Department of Economics, New School for Social Research)

Abstract

Recent developments in price of production models have proposed a hypothesis on the structure of the input coefficient matrices to explain the empirical near-linearity and monotonicity found in prices as a function of income distribution - the tendency towards zero of subdominant eigenvalues. The objective of this paper is twofold: First, based on the behavior of observed eigenvalues, the paper shows that they cannot explain by their own the regularities found in prices of production. Second, it is shown theoretically and empirically the existence and relevance of an additional force acting on the input matrix and the labor coefficient vector: the concentration of industries' vertically integrated compositions of capital around their average. It is argued that the combined effect of these two factors produces the empirical regularities in relative prices. The tendency of the vertically integrated labor to means of production proportions to cluster around their average reveals the existence of an economic force acting on the structure of technology of observable economies and calls for an explanation. The paper relies on the US 1987- 2007 Input-Output accounts, at the highest disaggregation level (between 370-466 sectors), for the empirical evidence in this paper.

Suggested Citation

  • Luis Daniel Torres Gonzalez, 2017. "Regularities in Prices of Production and the Concentration of Compositions of Capitals," Working Papers 1709, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1709
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    File URL: http://www.economicpolicyresearch.org/econ/2017/NSSR_WP_092017.pdf
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    References listed on IDEAS

    as
    1. Henryk Gurgul & Tomasz Wójtowicz, 2015. "On The Economic Interpretation Of The Bródy Conjecture," Economic Systems Research, Taylor & Francis Journals, vol. 27(1), pages 122-131, March.
    2. Mariolis, Theodore & Tsoulfidis, Lefteris, 2015. "Capital Theory ‘Paradoxes’ and Paradoxical Results: Resolved or Continued?," MPRA Paper 68214, University Library of Munich, Germany.
    3. Fotoula Iliadi & Theodore Mariolis & George Soklis & Lefteris Tsoulfidis, 2014. "Bienenfeld's Approximation of Production Prices and Eigenvalue Distribution: Further Evidence from Five European Economies," Contributions to Political Economy, Oxford University Press, vol. 33(1), pages 35-54.
    4. Bertram Schefold, 2013. "Approximate surrogate production functions," Cambridge Journal of Economics, Oxford University Press, vol. 37(5), pages 1161-1184.
    5. Mariolis, Theodore & Tsoulfidis, Lefteris, 2010. "Eigenvalue distribution and the production price-profit rate relationship in linear single-product systems: theory and empirical evidence," MPRA Paper 43716, University Library of Munich, Germany.
    6. Ellis Scharfenaker & Gregor Semieniuk, 2015. "A Statistical Equilibrium Approach to the Distribution of Profit Rates," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2015-05, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    7. Mariolis, Theodore & Tsoulfidis, Lefteris, 2016. "Capital theory: Less is more," MPRA Paper 75923, University Library of Munich, Germany.
    8. Bienenfeld, Mel, 1988. "Regularity in Price Changes as an Effect of Changes in Distribution," Cambridge Journal of Economics, Oxford University Press, vol. 12(2), pages 247-255, June.
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    11. Paul A. Samuelson, 1962. "Parable and Realism in Capital Theory: The Surrogate Production Function," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 193-206.
    12. Theodore Mariolis & Lefteris Tsoulfidis, 2014. "On Bródy'S Conjecture: Theory, Facts And Figures About Instability Of The Us Economy," Economic Systems Research, Taylor & Francis Journals, vol. 26(2), pages 209-223, June.
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    14. Schefold, Bertram, 2016. "Marx, the Production Function and the Old Neoclassical Equilibrium: Workable under the Same Assumptions? With an Appendix on the Likelihood of Reswitching and of Wicksell Effects," Centro Sraffa Working Papers CSWP19, Centro di Ricerche e Documentazione "Piero Sraffa".
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    More about this item

    Keywords

    Prices of production; Structure of technology; Concentration of capital compositions; Spectral decomposition; Eigenvalues; Eigenlabors; US economy;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian
    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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