Consumer Goods or Capital Goods-Supply Consistency in Development Planning

Gordon Winston

The Pakistan Development Review, 1967, vol. 7, issue 3, 348-378

Abstract: This paper combines simplified Harrod-Domar and Mahalanobis-type models, first to show that the internal consistency of a development plan may well depend on supply relationships that are usually ignored in aggregate planning, and second, to suggest the value of a more general version of the "two-gap1t model [11]. An empirical application of this analysis, to be published separately, will look at these supply relationships and their influence on Pakistan's development. The argument of the paper is simple and not unfamiliar. To the extent that installed capital is specific in what it produces and the products themselves are specific and non-substitutable between investment and consumption uses, the pattern of investment in one period may determine the allocation of subsequent income to saving or consumption and, therefore, the rate of growth of national income.

Date: 1967
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