A Multisector Model

Abstract

The models analyzed in Chapters 4 and 5 are very restrictive in the sense that they allowed only for one primary factor, one capital good, one rate of depreciation and one consumption good. It is the purpose of this chapter to generalize them for an economy with several primary factors, several capital goods, different rates of depreciation and several consumption goods; the latter can also serve as intermediate goods. In contrast to Chapter 5 we restrict the economic horizon to two periods, although work is in progress to give up this constraint. This restriction, however, is in some sense useful because it allows us to derive our conclusions much more easily than in a multisector model with an n-period economic horizon.

This chapter is closely related to Bernholz, Faber and Reiss [1977] and Bernholz, Faber and Reiss [1978] and uses material of these.