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The Surrogate Wage Function and Capital: Theory with Measurement

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  • Cengiz Ozol

Abstract

Technological change induces a structural change in both the values tableau and the prices tableau of an economy. The measurable change in the values tableau reveals the labor-saving effect and the measurable change in the prices tableau reveals the cost-reducing effect. A measure-preserving transformation between the values tableau and the prices tableau provides the basis for an unambiguous definition of the aggregate capital-labor ratio notion as a function of the rate of profit. The paper shows that the direction of shifts in the capital-functions of an economy depend on the relative strength of the labor-saving effect versus the cost-reducing effect of technological change. If the cost-reducing effect of technological change is greater (less) than the labor-saving effect, then the capital-labor ratio decreases (increases) and the system generates a rising (falling) tendency for the rate of profit.

Suggested Citation

  • Cengiz Ozol, 1991. "The Surrogate Wage Function and Capital: Theory with Measurement," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 175-191, February.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:1:p:175-91
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