Two-Sector Growth Models

Abstract

We consider an economy with two production sectors and a given technology. In the first sector, capital goods (machines) are produced with inputs of labour (measured for example, in man-years) and of the capital good itself. In the second sector, consumption goods are produced with the same two inputs. The capital good is assumed to be homogeneous. being combined with labour to produce either itself or the consumption good. It is assumed, further, to be of infinite durability, not subject to depreciation or mortality. The analysis, which depends heavily on the assumption of homogeneous capital, follows that of Hicks.†