Yashin, Pete (2017): Optimal Equilibrium State in TwoSector Growth Model.

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Abstract
The paper studies a twosector growth model for two cases: with flexible technology and with fixed coefficients. Different states of economic equilibrium (steady states) are compared. We find that the price of investment goods with respect to the price of consumer goods should be changed if the equilibrium state has shifted. Therefore, the aggregate production function cannot be considered as a purely technical. We assume that the income distribution is determined by the direct proportionality between the profits and the investment. Then the resulting function of aggregate output is continuous and differentiable in the domain of definition, even if the technology is fixed. In the last case the function has diminishing returns of capital under Uzawa capitalintensity condition; the state of economic equilibrium is stable only when this condition is valid. We suggest that the optimal is an equilibrium state that maximizes the total profit. The model with fixed coefficients predicts the possible existence of such an optimum.
Item Type:  MPRA Paper 

Original Title:  Optimal Equilibrium State in TwoSector Growth Model 
English Title:  Optimal Equilibrium State in TwoSector Growth Model 
Language:  English 
Keywords:  twosector growth model;optimal equilibrium state; aggregate production function; Uzawa capitalintensity condition; profit maximization 
Subjects:  E  Macroeconomics and Monetary Economics > E0  General > E00  General E  Macroeconomics and Monetary Economics > E1  General Aggregative Models > E10  General 
Item ID:  76524 
Depositing User:  Pete Yashin 
Date Deposited:  02 Feb 2017 12:23 
Last Modified:  02 Feb 2017 12:25 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/76524 