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THE ROLE OF SUBSTITUTION IN WICKSELL'S DURABLE CAPITAL MODEL |
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| Authors: | Keehyun Hong |
| Institution: | (Seoul National University)
Department of Economics Seoul National University Seoul 151-742 Korea. An earlier version of this paper was presented at the 18th annual meeting of the History of Economics Society in 1991. I am thankful to Professor Robert Dorfman, Associate Professor Murray Milgate at Harvard University and an anonymous referee for comments on the earlier version of this paper, even though all remaining errors are mine. |
| Abstract: | In this paper the author shows that the absence of a good which is used directly or indirectly for the production of other goods is a crucial feature of Wicksell's two-sector model, without which a positive relation between the value of machine stock and the consumption good output cannot be guaranteed. In fact he proves that, if that model is generalised by assuming that the capital good is used as an input also in its own production, the sign of the “marginal product of social capital” is indeterminate, even when both sectors have “well-behaved” production functions of a Cobb-Douglas type. |
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