Capital Immobility, Adjustment Costs, and the Theoretical Foundations of Income-Expenditure Models
Journal of Political Economy
1979
This paper reexamines traditional macrotheoretical questions in models that fully integrate conditions of production into the structure. The relative price of capital and consumer goods and the real rate of interest are required to equal the technical rates of transformation. Capital stocks are immobile between sectors, and increasing marginal costs of introducing new capital goods into the production process are assumed. Given plausible values of the parameters, standard fiscal policies may not change aggregate demand in the directions predicted by the IS-LM approach. And to judge what outcome is most likely requires considerable information about an economy's structure of production.
- DOI
- 10.1086/260756
- Volume
- 87 (2)
- Pages
- 267-291
- Language
- en
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- BibTeX
- Sources
- openalex crossref