Factor-Intensity Reversals under Monopolistic Competition

Johan Torstensson

Bulletin of Economic Research, 1996, vol. 48, issue 2, 129-36

Abstract: This paper shows that it is impossible to rule out factor-intensity reversals (FIRs) under monopolistic competition unless production functions are homothetic. We construct a simple example where the capital-intensity at unchanged output is fixed, but where FIRs still can occur because equilibrium output and thus the average capital-intensity depends on the wage-rental ratio. Copyright 1996 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1996
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