Joint Production in a Two-Sector Model

Abstract

When analyzing price and quantity relationships in input-output models almost exclusively single-product industries are used. There are only few contributions in which it is inquired what difference it makes if single-product industries are replaced by joint production. The inquiry usually ends in complications which make the further analysis intractable and the result agnostic (Pasinetti, 1980; Schefold, 1989). It is shown that if the theoretical background is the same as in Horvat (1989), the ensuing analysis is relatively simple. Two sectors are considered: production of baskets of consumer goods and production of machinery with an unchanging structure of production. The first sector represents the net output and the second a subsidiary one catering for itself and for the first sector. Duality between price and quantity is utilized. The simplicity is not disturbed when fixed capital and expanding economy are considered. At the end the wage-profit curve is derived.