Rents, resources, and multiple technologies; Ricardian mechanisms in input-output modelling

Albert E. Steenge, Maaike C. Bouwmeester and Andre Carrascal Incera

Economic Systems Research, 2019, vol. 31, issue 3, 445-466

Abstract: To allow for ‘multiple technologies’ to produce a homogeneous output in input–output models, Duchin and Levine [(2011) Sectors may use Multiple Technologies Simultaneously: The Rectangular Choice-of-technology Model with Binding Factor Constraints, Economic Systems Research, 23(3), 281–302] propose an optimization model constrained by primary resources. We show that the Duchin–Levine model contains two different mechanisms by which multiple technologies can arise. If a factor in short supply is shared by the original and the newly entering technology, the output of the original, lower-cost technology will be reduced to make room for the higher-cost technology which is less intensive in that factor. In contrast, if the factor in short supply is technology-specific, a higher-cost technology supplements the original lowest-cost one, which stays fully active. Either mechanism implies a mechanism-specific set of prices, quantities and rents. We relate these results to classical views on comparative advantage, fixed output levels and the origin of rents.

Date: 2019
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DOI: 10.1080/09535314.2018.1558177

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