Journal Article Regional Allocation of Investment: The Continuous Version Get access Anisur Rahman, Md. Anisur Rahman, Md. University of Dacca, East Pakistan Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 80, Issue 1, February 1966, Pages 159–160, https://doi.org/10.2307/1880587 Published: 01 February 1966

Introduction, 26. — The problem defined, 28. — The solution, 30. — Summary, 37. — Conclusion, 39.

Trygve Haavelmo [1], in a question to Professor Leontief (2, p. 1062) has suggested the following interesting hypothesis about a developing country's savings function: I(t) = a[Y(t) + H(t)], where stands for gross investment, Y for GNP and H for capital inflows. That is to say, in Haavelmo's words, investment . . . is a function of . . . income including what they get from abroad. I think, Haavelmo adds, see the implications. It means, for example, that domestic savings could be negative if H is very large. The core of Haavelmo's suggestion is, believe, that domestic savings is not a function of national income alone but is also related, inversely, with the inflow of foreign capital. To impart more generality shall alter the Haavelmo equation slightly without distorting its central message. Let us postulate l(t) = aY(t) + bH(t). From this we have domestic savings, denoted by S(t), as given by S(t) = aY(t) + b'H(t), where b' = b 1.