Non-Monotonic C(R) Relations in the Absence of Complementarity

Abstract

In both 1976 and 1987 Tatsuo Hatta showed that consumption reversal (dc/dr > 0) can occur in a three-period Wicksellian model of production only if the first and the third labour inputs are Hicksian complements. (This was also generalized to n labour inputs.) Unfortunately, he drew the bold conclusion that consumption reversal is merely one more complication introduced by input complementarity. It is shown here that the specific formal result does not generalize and that the bold claim cannot be sustained.