Maximal Growth when Food Output Is Uncertain

  • Avinash K. Dixit

Abstract

The paper investigates the effects of uncertainty in food output on growth in an economy with an industrial sector and an agricultural sector linked by consumption demand and labour supply relationships. In such an economy, a poor crop raises the relative price of food and hence the wage rate. It is shown that as a result, the maximum expected rate of growth for the economy is less than the maximum rate achievable when the expected food output is produced with certainty. Inventory policy for reducing this cost of uncertainty is analysed, and its efficacy is shown to depend on the change in uncertainty as agriculture acquires more capital.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 1.
    A. K. Dixit: Marketable Surplus and Dual Development. The Journal of Economic Theory, I (2), (1969), pp. 203–219.CrossRefGoogle Scholar
  2. 2.
    See L. Breiman: Optimal Gambling Systems for Favorable Games. In Proceedings of the Fourth Berkeley Symposium on Mathematical Statistics and Probability, Vol. 1, Berkeley: University of California Press, (1961), pp. 65–78.Google Scholar
  3. 3.
    R. Radner: Balanced Stochastic Growth at the Maximum Rate. This volume, pp. 39–52.Google Scholar

Copyright information

© Springer-Verlag Wien 1971

Authors and Affiliations

  • Avinash K. Dixit
    • 1
  1. 1.Balliol CollegeOxfordGreat Britain

Personalised recommendations