Further evidence on the law of factor proportionality in multiple households closed CGE models

Yves Balasko and Octavio Augusto Tourinho

Applied Economics Letters, 2017, vol. 24, issue 12, 831-836

Abstract: This article provides additional evidence that factor contents of different consumers’ consumption bundles computed from multiple households closed Computable General Equilibrium (CGE) models are approximately proportional. This empirical regularity has been observed up to now for a total of 11 CGEs for very diverse countries, and we therefore state it as law. It implies that these models display price rigidity with respect to endowment re-allocations, an observation which has broad implications for their capacity to capture general equilibrium effects.

Date: 2017
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DOI: 10.1080/13504851.2016.1231891

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