Journal Article

Decomposing the Changes in Production Prices into “Capital-Intensity” and “Price” Effects: Theory and Evidence from the Chinese Economy

Theodore Mariolis and Lefteris Tsoulfidis

in Contributions to Political Economy

Volume 28, issue 1, pages 1-22
Published in print June 2009 | ISSN: 0277-5921
Published online April 2009 | e-ISSN: 1464-3588 | DOI: https://dx.doi.org/10.1093/cpe/bzp002
Decomposing the Changes in Production Prices into “Capital-Intensity” and “Price” Effects: Theory and Evidence from the Chinese Economy

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  • Mathematical Methods; Programming Methods; Mathematical and Simulation Modelling
  • General Equilibrium and Disequilibrium

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This paper deals with the changes in prices of production induced by variations in income distribution on the basis of a linear model of production with circulating capital and homogeneous labour. It is shown that the total effect of income distribution on prices can be decomposed into a “capital-intensity” and a “price” effect and that, in actual economies, the former is expected to dominate the latter. In order to obtain a concrete idea of the actual trajectories of the price movements and to quantify the relative strength of the two effects, we use input–output data of the Chinese economy.

Keywords: C67; D57

Journal Article.  7111 words.  Illustrated.

Subjects: Mathematical Methods; Programming Methods; Mathematical and Simulation Modelling ; General Equilibrium and Disequilibrium

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