KALDORIAN DEMAND FUNCTIONS AND THE RETURN TO CAPITAL: AN ANALYSIS IN A TRADE THEORETIC FRAMEWORK |
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| Authors: | Manmohan Agarwal Bharat R. Hazari |
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| Affiliation: | Centre for International Governance Innovation (CIGI);
City University of Hong Kong |
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| Abstract: | Abstract. This paper shows that under certain plausible conditions capital accumulation raises the return to capital. A three good trade theoretic model with Kaldorian demand functions is used to establish this result. This proposition is also independent of the assumption of diminishing return to capital a key feature of endogenous growth theory. Our result sheds light on the high rates of investment and growth that many East Asian economies have achieved. |
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