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Reverse Capital Deepening and the Numeraire: a note

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  • Heinz Kurz
  • Neri Salvadori

Abstract

This note discusses the implication of reverse capital deepening for neoclassical theory, placing special emphasis on the role of the numeraire. It is shown that under certain assumptions, specified in the note, a supply function of capital can be built up that is independent of the demand function. The supply of capital is given in terms of the consumption unit. Reverse capital deepening is reflected in upward sloping segments of the corresponding demand function. A change in numeraire, while generally affecting the shape of the demand function, does not affect the stability property of equilibrium, because it will also affect the shape of the supply function. Hence, what matters is not whether the demand function is upward sloping or not, but whether it cuts the supply function from above or from below. This property, however, is preserved with a change in the numeraire.

Suggested Citation

  • Heinz Kurz & Neri Salvadori, 1998. "Reverse Capital Deepening and the Numeraire: a note," Review of Political Economy, Taylor & Francis Journals, vol. 10(4), pages 415-426.
    • Handle: RePEc:taf:revpoe:v:10:y:1998:i:4:p:415-426
    DOI: 10.1080/09538259800000061
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    Cited by:

    1. Ariel Dvoskin & Fabio Petri, 2015. "Again on the relevance of reverse capital deepening and reswitching," Department of Economics University of Siena 710, Department of Economics, University of Siena.
    2. repec:clr:wugarc:y:2011:v:37i:1p:15 is not listed on IDEAS
    3. Kurz, Heinz D. & Salvadori, Neri, 2001. "The aggregate neoclassical theory of distribution and the concept of a given value of capital: a reply," Structural Change and Economic Dynamics, Elsevier, vol. 12(4), pages 479-485, December.
    4. Kurz, Heinz D. & Salvadori, Neri, 2003. "Fund-flow versus flow-flow in production theory: Reflections on Georgescu-Roegen's contribution," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 487-505, August.
    5. Gaetano Bloise & Pietro Reichlin, 2009. "An Obtrusive Remark On Capital And Comparative Statics," Metroeconomica, Wiley Blackwell, vol. 60(1), pages 54-76, February.

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