[OPE-L:8592] Re: Re: RE: long term centers of gravity?

From: Gil Skillman (gskillman@wesleyan.edu)
Date: Wed Mar 12 2003 - 15:37:12 EST

Rakesh writes, among other things:

>In fact it's impossible that viable technical change will result in
>FROP if one assumes that input=output prices.

For what it's worth, that's not true.  FROP may also emerge under 
alternative mechanisms of price determination consistent with the 
steady-state condition that equates input and output prices.  For example, 
if you abandon the auction-style Walrasian model of equilibrium wage 
determination for one based on a certain form of sequential matching (more 
relevant for the analysis of labor markets, if you ask me), then a FROP can 
be shown to emerge in equilibrium without any differentiation between input 
and output prices.  If interested, see my October 1997 Metroeconomica 
article demonstrating this.  It generalizes and provides a microfoundation 
for earlier results by Foley and Laibman, who both in effect assume that 
the wage share of net product is invariant to technical change.


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