The firm and the plant in general equilibrium theory

Andreas Hornstein and Edward Prescott

No 126, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The general equilibrium formulations are developed for two important economic environments. The first environment is the Lucas managerial span-of-control theory of the firm. It is shown that, in the spirit of McKenzie, the aggregate production set can be characterized by a convex cone. The second environment permits both the number of hours plants are operated and the number of workers operating them to be varied. For empirically reasonable elasticities of substitution, equilibrium is characterized by employment-consumption lotteries.

Keywords: Labor productivity; Business enterprises (search for similar items in EconPapers)
Date: 1989
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Citations: View citations in EconPapers (27)

Published in General Equilibrium, Growth and Trade (Vol. 2, 1993, pp. 393-410)

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