A Suggested Model of Economic Transformation

Ronny Norén
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Ronny Norén: Mid Sweden University

Chapter Chapter 6 in Equilibrium Models in an Applied Framework, 2013, pp 99-107 from Springer

Abstract: Abstract In this chapter a model of an open economy to illustrate the principles of the industrial transformation process, i.e., investment and disinvestment, is discussed. However, the model is focused on medium run. In the medium time period the time is too short for all things to be reallocated, because of the sluggishness of the market. More precisely, we approach the equilibrium but we cannot reestablish it in full. To counteract the rigidity of the market, and establish equilibrium, the entrepreneur will become important as an economic actor. The key concept of the economic transformation process is the domestic profit rate, or as we here will call it, rate of return, because it is related to investment. Economic transformation will be specified as endogenous, and it will become an integral part of a steady-state equilibrium mechanism.

Keywords: Capital Stock; Entrepreneurial Activity; Domestic Investment; Economic Transformation; Profit Rate (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-34994-2_6

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DOI: 10.1007/978-3-642-34994-2_6

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