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The Allocation of Resources under Uncertainty

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  • Harris Dellas
  • Ana Fernandes

Abstract

We study the effects of uncertainty on the allocation of resources in the standard, static, general equilibrium, two-sector, two-factor model. The elasticity of substitution in production vs that in consumption plays a key role in determining whether uncertainty attracts or repels resources. Risk aversion matters, but to a smaller extent, while factor endowments and factor intensities play a more limited role.

Suggested Citation

  • Harris Dellas & Ana Fernandes, 2006. "The Allocation of Resources under Uncertainty," Diskussionsschriften dp0606, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp0606
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    References listed on IDEAS

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    1. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007, Elsevier.
    2. Anderson, James E., 1981. "The Heckscher-Ohlin and Travis-Vanek theorems under uncertainty," Journal of International Economics, Elsevier, vol. 11(2), pages 239-247, May.
    3. Eaton, Jonathan, 1979. "The Allocation of Resources in an Open Economy with Uncertain Terms of Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 391-403, June.
    4. Thomas J. Rothenberg & Kenneth R. Smith, 1971. "The Effect of Uncertainty on Resource Allocation in a General Equilibrium Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(3), pages 440-459.
    5. Helpman, Elhanan & Razin, Assaf, 1979. "A Theory of International Trade Under Uncertainty," Elsevier Monographs, Elsevier, edition 1, number 9780123396501 edited by Shell, Karl.
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    Keywords

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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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