From: rakeshb@stanford.edu
Date: Wed Mar 12 2003 - 15:56:51 EST
Quoting Gil Skillman <gskillman@wesleyan.edu>: > Rakesh writes, among other things: > > > >In fact it's impossible that viable technical change will result in > >FROP if one assumes that input=output prices. > > For what it's worth, that's not true. Dear Gil, I appreciate your correction. I regretted the line soon after I sent the post. I had forgotten Shaikh's argument; I did not know of yours. My statement is, at any rate, a gross distortion. Rakesh FROP may also emerge under > alternative mechanisms of price determination consistent with the > steady-state condition that equates input and output prices. For > example, > if you abandon the auction-style Walrasian model of equilibrium wage > > determination for one based on a certain form of sequential matching > (more > relevant for the analysis of labor markets, if you ask me), then a > FROP can > be shown to emerge in equilibrium without any differentiation between > input > and output prices. If interested, see my October 1997 Metroeconomica > > article demonstrating this. It generalizes and provides a > microfoundation > for earlier results by Foley and Laibman, who both in effect assume > that > the wage share of net product is invariant to technical change. > > Gil > > > >
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