Dynamic Adjustments in a Two-Sector Model

• F. Galera ^[1] ; P. Coto-Millán ^[2]
  1. [1] Universidad de Navarra
  2. [2] Universidad de Cantabria
• Localización: Essays on microeconomics and industrial organisation / coord. por Pablo Coto Millán, 2002, ISBN 3-7908-1390-7, págs. 333-341
• Idioma: inglés
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• Resumen

  • This paper presents a simple dynamic model in which only one resource is used centirely in order to produce two goods. Technology displays constant returns in both cases. The resource is owned by a few individuals who must choose between the two activities in which to use it. Here we analyse the decisions of change of activity in which the resource is to be used taking into account the different profitability per time unit of the activities directed to produce both goods. We show that, under certain conditions, it is possible to reach cyclic, or chaotic, dynamics so that the returns per factor may never be equal in both sectors.