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Some Theorems of Trade and General Equilibrium with Many Goods and Factors

Econometrica 1979 47(3), 709
This paper examines various theorems of trade and general equilibrium in a generalized framework involving arbitrary numbers of goods and factors. It develops structural relations among the changes in outputs, commodity prices, factor rewards, and factor endowments. By finding a way of inverting a bordered matrix with a singular Hessian, the paper derives explicit expressions for the following matrices: the Stolper-Samuelson matrix; the Rybczynski matrix; the matrix which measures the effect of a change in factor endowments upon factor rewards at constant commodity prices; and the matrix which measures the effect of a change in commodity prices upon outputs at constant factor endowments. Various properties of these matrices are used to obtain, among other results, the reciprocity relations and general results on factor-price equalization. The paper also ey.amines the problem of indeterminacy in production when the number of commodities exceeds the rank of the input-coefficient matrix and presents the correct specifications of the supply functions of outputs. Finally a new theorem on the degree of flatness of the production transformation surface is derived.

Capital Aggregation in a General Equilibrium Model of Production

Econometrica 1976 44(6), 1179
[In this paper, we focus on capital aggregation in a general equilibrium model of production. Various potential aggregates involving intrasectoral and intersectoral, as well as full aggregation are discussed in connection with the various aggregation procedures. It will be shown that the satisfaction of the Gorman conditions allows for full aggregation within a general equilibrium model of production. We shall derive new conditions for aggregation using a composite commodity approach that appears to be somewhat weaker than the conditions associated with restrictions-on-functional-form theorems. Our main conditions relate to the equality of sectoral labor shares. The data for testing those conditions appear to be readily available. It is shown that the equal labor share condition can be applied to models with joint and nonjoint products. In addition, the conditions for aggregation are derived for a model with many primary inputs and also for a model with unequal rates of depreciation. Two sections are devoted to the main correspondences between certain aggregation procedures in the literature from the point of view of a general equilibrium model. The implications of our analysis for the form of the unit cost function and of the aggregate production function are discussed. In particular, if our aggregation condition holds, then the aggregate production function can be Cobb-Douglas, if one of the sectoral forms is also Cobb-Douglas, irrespective of the forms of the other sectoral production functions.]