Structural Economic Dynamics with a Choice of Technique: A Numerical Example
35 Pages Posted: 24 Oct 2017
Date Written: October 22, 2017
This article illustrates the application of bifurcation analysis to structural economic dynamics with a choice of technique. A numerical example of the Samuelson-Garegnani model is presented in which technical change is introduced. Examples of temporal paths through the parameter space illustrate variations of the wage frontier. A single technique is initially uniquely cost-minimizing for all feasible rates of profits. Eventually, the technique for which coefficients of production decrease at the fastest rates is always cost-minimizing. During the transition between these positions, reswitching, the recurrence of techniques, and capital-reversing can arise. This example emphasizes the importance of fluke switch points and illustrates possible variations in the existence of Sraffa effects.
Keywords: Choice Of Technique, Structural Dynamics, Bifurcations, Switch Points, Technological Change
JEL Classification: B24, D24
Suggested Citation: Suggested Citation