ISSN:
1432-0479
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Summary In both theoretical and empirical research it is a common practice to partition the economy into (at least) two sectors in order to conduct partial-equilibrium analysis. One merely hopes that general-equilibrium consequences will not obviate all of the analysis of the sector or market in question. In this paper we consider market demand functions which have a two-sector representation. In such economies the aggregate compensated demands in any one sector depend only on prices in that sector, the vector of utilities, and a scalar aggregate which in turn may depend upon everything. In particular, prices in the other sector appear only through this aggregate. In a single-consumer economy this division into two sectors carries with it no further implications. However, when there are three or more consumers, economies with a two-sector representation, which may contain public as well as private goods, must fall into a small number of broad classes which are quite restrictive. This means that the two-sector assumption is far less innocuous than one might have previously believed and that there are some phenomena which simply cannot be investigated in this framework.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF01210267
Permalink
