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Market-dependent Production Set

Author

Listed:
  • Henrik Egbert

    (Anhalt University of Applied Sciences Bernburg)

  • Nadeem Naqvi

    (Justus Liebig University, Giessen)

Abstract

A country’s production possibility frontier or PPF is defined as the boundary of its economy’s production set in the net output space for a given technology and fixed quantities of primary factors of production. In general equilibrium theory, exogenous changes in technology or primary-factor supplies alter equilibrium prices; however, government-policy induced domestic relative commodity price changes do not alter the shape of an economy’s production set. We show that, under international capital mobility, which is empirically significant, the shape of a country’s production set does, in fact, depend on market forces and this shape can be manipulated by government policy.

Suggested Citation

  • Henrik Egbert & Nadeem Naqvi, 2011. "Market-dependent Production Set," MAGKS Papers on Economics 201145, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201145
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    References listed on IDEAS

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    1. Vandana Chandra & Nadeem Naqvi, 1997. "Protection and the Shadow Price of Foreign Exchange with Increasing Returns and International Capital Mobility," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 959-967, November.
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    Cited by:

    1. Carolin V. Schürg & Nadeem Naqvi, 2011. "Efficiency-wage Hypothesis and the Operational Production Pattern," MAGKS Papers on Economics 201146, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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    More about this item

    Keywords

    general equilibrium; production possibility frontier; production set; international capital mobility; economic policy;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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