Non-homothetic multisector growth models

Jensen BJ, Lehmijoki U, & Rovenskaya E (2015). Non-homothetic multisector growth models. Review of Development Economics 19 (2): 221-243. DOI:10.1111/rode.12139.

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Abstract

Multisector growth (MSG) models are dynamic versions of computable general equilibrium (CGE) models. Non-homothetic preference (utility) functions are required for the evolution of factor allocations and industrial structures in accordance with consumption expenditure patterns implied by the non-unitary income elasticities observed in all budget data since Engel in the 1850s. But comparative static general equilibrium solutions and particularly solving the dynamics of MSG models require explicit spcifications of all demand and cost (price) functions. On the demand side, the constant differences of elasticity of substitution (CDES) on-homothetic indirect utility functions and Roy's identity provide the explicit Marshallian demand functions and budget shares. Sectorial constant elasticity of substitution (CES) cost functions and Shephard's lemma provide the explicit relative commodity price functions and the sectorial cost shares and capital-labor ratios. Walrasian equilibria are given by one equation and the multisector dynamics by three differential equations. Benchmark solutions are given for three cost regimes of a 10-sector MSG model. History patterns of indstrial/allocational evolutions are recognized.

Item Type: Article
Research Programs: Advanced Systems Analysis (ASA)
Bibliographic Reference: Review of Development Economics; 19(2):221-243 [May 2015] (Published online 17 April 2015)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:52
Last Modified: 17 Feb 2016 15:24
URI: http://pure.iiasa.ac.at/11313

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