The Multi-Sectoral Theory of Economic Growth

Abstract

I devote this lecture to presenting the classical Walrasian model in its smallest scale and to examining it for the existence of a growth equilibrium. We assume that the economy we are going to be concerned with consists of many firms that are classified into two industries: the consum-tion-good industry and the capital-good industry.

It is assumed that a finite number of manufacturing processes are available to each industry. Let ∝_ι and λ_ι be the capital- and labour- input coefficients of the ι-th process of the consumtion-good industry (ι, = 1,…μ), and a_i and l_i the corresponding coefficients of the i-th process of the capital-good industry (i=l …, m). (We are following Professor Hicks in denoting prices and quantities referring to the consumption-good sector by Greek letters and those to the capital-good sector by the corresponding Latin letters). For the sake of simplicity we assume that all ∝'s, λ's, a's and l's are positive and that the capital-good does not suffer wear and tear.