Distortions in Factor Markets and the General Equilibrium Model of Production

Abstract

A premium paid to a factor of production in one industry over the return earned by the same factor in the other industry in a two-sector model is a distortion that affects all factor prices and the general efficiency of production. It allows for the possibility that the industry employing the higher capital-labor ratio nonetheless pays labor a higher distributive share. In such a case, commodity outputs are inversely related to commodity prices. Furthermore, the paper explores how distortions can affect the shape of the transformation schedule and the optimal strategy to be followed by a factor of production intent on maximizing its returns.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 190 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.