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Transition to Balanced Growth

In: Balanced and Cyclical Growth in Models of Decentralized Economy

Author

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  • Alexander P. Abramov

    (Russian Academy of Sciences)

Abstract

In this chapter, we consider algorithms for asymptotic transition to balanced growth in models of economic systems that use Leontief technologies. The first algorithm assumes that all sectors, when determining their output plans, choose a single projected value of their sales expansion rate. It also assumes that no sector is given priority with respect to receiving resources in short supply. The second algorithm differs from the first one in that planning is now based on observed demand. Both algorithms use the same mechanism of resource distribution whereby order sizes are adjusted to comply with adjusted output plans. We show that the alternative resource distribution algorithm, which distributes resources in proportion to demand, can cause a limit cycle in the sequence of normalized outputs. We consider mechanisms used by sectors to agree on estimates of the expansion rate, which are necessary when planning production.

Suggested Citation

  • Alexander P. Abramov, 2014. "Transition to Balanced Growth," Lecture Notes in Economics and Mathematical Systems, in: Balanced and Cyclical Growth in Models of Decentralized Economy, edition 127, chapter 0, pages 41-79, Springer.
    • Handle: RePEc:spr:lnechp:978-3-319-07917-2_3
    DOI: 10.1007/978-3-319-07917-2_3
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