Determination of Prices as Comparison of Market Prices to Natural Prices: Input Output Analysis of Japan for 1951-2000

Akiko Nakajima

Bulletin of Political Economy, 2013, vol. 7, issue 2, 125-144

Abstract: Natural prices, i.e., value relative prices (prices relative to the total labour required to produce each commodity) are identically equal to income equalizing prices when capital costs are proportioned to capital goods’ supplying sectors. This paper constructs natural prices as income equaling prices and they are compared to market prices. Empirical findings show that the gap between natural prices and market prices decrease over time according to one data set. According to another data set, gap between natural prices and market prices widens at times when the economy is in boom. International competition decreases the gap. Profitable industries at profitable periods increase the gap.

Date: 2013
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