Relative Prices, Capital Movements, and Sectoral Technical Change: Theory and an Empirical Test

  • John S. Chipman
Part of the International Economic Association Series book series (IEA)


This paper constitutes an initial attempt to sort out and assess, within a neo-classical general-equilibrium framework, the relative and absolute importance of three separate potential influences on domestic sectoral-prices within a country: (1) external prices, (2) capital movements, and (3) technological change. Monthly data for West Germany and Sweden are used, since these are among the few countries for which price-index series exist for imports and exports, classified consistently with the price-index series for commodities sold on the domestic market.2


Price Index Technical Change Relative Prex House Rent Current Account Deficit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Aukrust, Odd (1970) ‘PRIM I: A Model of the Price and Income Distribution Mechanism of an Open Economy’, Review of Income and Wealth, vol. 16 (Mar), 51–78.CrossRefGoogle Scholar
  2. Aukrust, Odd (1977) ‘Inflation in the Open Economy: a Norwegian Model’, in Lawrence B. Krause and Walter S. Salant (eds), Worldwide Inflation: Theory and Recent Experience (Washington, DC: The Brookings Institution) pp. 107–66.Google Scholar
  3. Balassa, Bela (1964) ‘The Purchasing-Power Parity Doctrine: a Reappraisal’, Journal of Political Economy, vol. 72 (Dec), 584–96.CrossRefGoogle Scholar
  4. Chipman, John S. (1969) ‘Factor-Price Equalization and the Stolper-Sam-uelson Theorem’, International Economic Review, vol. 10 (Oct), 399–406.CrossRefGoogle Scholar
  5. Chipman, John S. (1972) ‘The Theory of Exploitative Trade and Investment Policies; a Reformulation and Synthesis’, in Luis Eugenio DiMarco (ed.), International Economics and Development: Essays in Honor of Raúl Prebisch (New York: Academic Press) pp. 209–44.Google Scholar
  6. Chipman, John S. (1978) ‘Towards the Construction of an Optimal Aggregate Model of International Trade: West Germany, 1963–1975’, Annals of Economic and Social Measurement, vol. 6 (Winter-Spring), 535–54.Google Scholar
  7. Chipman, John S. (1980) ‘Exchange-Rate Flexibility and Resource Allocation’, in John S. Chipman and Charles P. Kindleberger (eds), Flexible Exchange Rates and the Balance of Payments: Essays in Memory of Egon Sohmen (Amsterdam: North-Holland Publishing Co.) pp. 159–209.Google Scholar
  8. Chipman, John S. (1981) ‘Internal-External Price Relationships in the West German Economy, 1958–1979’, Zeitschrift für die gesamte Staatswissenschaft, vol. 137 (Sept), 612–37.Google Scholar
  9. Chipman, John S. (1982) ‘Dynamic Adjustment of Internal Prices to External Price Changes, Federal Republic of Germany, 195–1979: An Application of Rank-Reduced Distributed-Lag Estimation by Spline Functions’, in Wolfgang Eichhorn, Rudolf Henn, Klaus Norman, and Ronald W. Shephard (eds), Quantitative Studies on Production and Prices (Würzburg: Physica-Verlag) in press.Google Scholar
  10. Chipman, John S., and Ronald D. Sands (1981) ‘A New Method of Estimating the Effects of External on Internal Prices: West Germany, 1958–1979’ typescript, 22 April 1981.Google Scholar
  11. Corradi, C., and G. Gambetta (1975) ‘The Estimation of Distributed Lags by Spline Functions’, Empirical Economics, vol. 1 (Issue 1), 41–51.CrossRefGoogle Scholar
  12. Debreu, Gerard, and N.E. Herstein (1953) ‘Nonnegative Square Matrices’, Econometrica, vol. 21 (Oct), 597–607.CrossRefGoogle Scholar
  13. Edgren, Gösta, Karl-Olof Fax́en, and Clas-Erik Odhner (1973) Wage Formation and the Economy (London: George Allen & Unwin).Google Scholar
  14. 93.
    Gale, David, and Hukukane Nikaido (1965) ‘The Jacobian Matrix and Global Univalence of Mappings’, Mathematische Annalen, vol. 59, 81–.CrossRefGoogle Scholar
  15. Golub, G.H. and C. Reinsch (1970) ‘Singular Value Decomposition and Least Squares Solutions’, Numerische Mathematik, vol. 14, 403–20.CrossRefGoogle Scholar
  16. Graham, Frank D. (1922) ‘International Trade under Depreciated Paper The United States, 1862–79’, Quarterly Journal of Economics, vol. 36 (Feb), 220–73.CrossRefGoogle Scholar
  17. Greville, T.N.E. (1967) ‘Spline Functions, Interpolation, and Numerical Quadrature’, in Anthony Ralston and Herbert S. Wilf, (eds), Mathematical Methods for Digital Computers, vol. II (New York: John Wiley) pp. 156–68.Google Scholar
  18. Haberler, Gottfried (1973) ‘International Aspects of U.S. Inflation’, in Phillip Cagan et al., A New Look at Inflation. Washington, DC: American Enterprise Institute for Public Policy Research, pp. 79–105.Google Scholar
  19. Hawkins, David, and Herbert Simon (1949) ‘Note: Some Conditions of Macroeconomic Stability’, Econometrica, 17 (July-Oct), 245–48.CrossRefGoogle Scholar
  20. Keynes, J.M. (1929) ‘The German Transfer Problem’, Economic Journal, vol. 30 (Mar) 1–7.CrossRefGoogle Scholar
  21. Khang, Chulsoon, and Yasuo Uekawa (1973) ‘The Production Possibility Set in a Model Allowing Interindustry Flows: The Necessary and Sufficient Conditions for its Strict Convexity’, Journal of International Economics, vol. 3 (Aug), 293–90.Google Scholar
  22. Lindbeck, Assar (1979) ‘Imported and Structural Inflation and Aggregate Demand: The Scandinavian Model Reconstructed’, in Assar Lindbeck (ed.), Inflation and Employment in Open Economies (Amsterdam: North-Holland Publishing Co.) pp. 13–40.Google Scholar
  23. Machlup, Fritz (1943) International Trade and the National Income Multiplier (Philadelphia: The Blakiston Co.)Google Scholar
  24. Marquardt, Donald W. (1970) ‘Generalized Inverses, Ridge Regression, Biased Linear Estimation, and Nonlinear Estimation’, Technometrics, vol. 12 (Aug), 591–612.CrossRefGoogle Scholar
  25. McKenzie, Lionel W. (1960) ‘Matrices with Dominant Diagonals and Economic Theory’, in Kenneth J. Arrow, Samuel Karlin, and Patrick Suppes (eds), Mathematical Methods in the Social Sciences, 1959 (Stanford, California: Stanford University Press) pp. 47–62.Google Scholar
  26. McKinnon, Ronald I. (1971) Monetary Theory and Controlled Flexibility in the Foreign Exchanges. Princeton, NJ: Princeton University, International Finance Section, Essays in International Finance, no. 84.Google Scholar
  27. Ohlin, Bertil (1928) ‘The Reparations Problem’, Index (Svenska Handelsbanken, Stockholm), no. 28 (Apr), 2–33.Google Scholar
  28. Poirier, Dale J. (1976) The Econometrics of Structural Change (Amsterdam: North-Holland Publishing Co.)Google Scholar
  29. Samuelson, Paul A., (1953) ‘Prices of Factors and Goods in General Equilibrium’, Review of Economic Studies, vol. 21, 1–20.CrossRefGoogle Scholar
  30. Schultz, Theodore W. (1961) ‘Investment in Human Capital’, American Economic Review, Papers and Proceedings, vol. 51 (Mar), 1–17.Google Scholar
  31. Shephard, Ronald W. (1981) Cost and Production Functions (Princeton: Princeton University Press, 1953). Second printing: Berlin, Heidelberg, New York: Springer-Verlag.CrossRefGoogle Scholar
  32. Viner, Jacob (1924) Canada’s Balance of International Indebtedness, 1900–1913. (Cambridge, Mass.: Harvard University Press).Google Scholar
  33. Wedin, Per-Åke (1973) ‘On the Almost Rank Deficient Case of the Least Squares Problem’, BIT (Nordisk Tidskrift for Informationsbehandling), vol. 13 (Hefte Nr 3), 344–54.Google Scholar
  34. Wilson, Roland (1931) Capital Imports and the Terms of Trade. Melbourne: Melbourne University Press, in association with Macmillan.Google Scholar
  35. Wilson, Roland (1931) Capital Imports and the Terms of Trade. Melbourne: Melbourne University Press, in association with Macmillan.Google Scholar
  36. Michaely, M. (1980) ‘Capital Imports, Economie Structure, and Dependence’, Seminar Paper No. 163, Institute for International Economie Studies, University of Stockholm, November 1980.Google Scholar
  37. Razin, A. (1980) ‘Capital Movements, Intersectoral Resource Shifts, and the Trade Balance’, Seminar Paper No. 159, Institute for International Economie Studies, October 1980.Google Scholar

Copyright information

© International Economic Association 1985

Authors and Affiliations

  • John S. Chipman
    • 1
  1. 1.University of MinnesotaUSA

Personalised recommendations