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

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  • Yves Balasko
  • Octavio Tourinho

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.

Suggested Citation

  • Yves Balasko & Octavio Tourinho, 2017. "Further evidence on the law of factor proportionality in multiple households closed CGE models," Applied Economics Letters, Taylor & Francis Journals, vol. 24(12), pages 831-836, July.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:12:p:831-836
    DOI: 10.1080/13504851.2016.1231891
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 215-215.
    2. Yves Balasko & Octavio Tourinho, 2014. "Factor proportionality in multiple households closed CGE models: theory and illustrations," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 119-136, October.
    3. Irma Adelman & Sherman Robinson, 1986. "U.S. Agriculture in a General Equilibrium Framework: Analysis with a Social Accounting Matrix," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(5), pages 1196-1207.
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