Differential Depreciation and the 2 X 2 Model of Distribution, Pricing and Production

8 Pages Posted: 8 May 2006

See all articles by Ian Steedman

Ian Steedman

Manchester Metropolitan University - Department of Economics

Abstract

In a two-sector model it is entirely arbitrary to take the depreciation rate to be the same in both sectors; capital is being used differently in the two sectors! With differential depreciation rates factor-intensity-reversal can arise even when both sectors have a Cobb-Douglas technology. Efficient allocations do not involve mutual tangency points between consumption-good and capital-good isoquants.

Suggested Citation

Steedman, Ian, Differential Depreciation and the 2 X 2 Model of Distribution, Pricing and Production. Metroeconomica, Vol. 57, No. 1, pp. 112-119, February 2006, Available at SSRN: https://ssrn.com/abstract=877393 or http://dx.doi.org/10.1111/j.1467-999X.2006.00235.x

Ian Steedman (Contact Author)

Manchester Metropolitan University - Department of Economics ( email )

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