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Title:Market-dependent production set PDF Logo
Authors:Egbert, Henrik
Naqvi, Nadeem
Issue Date:2011
Series/Report no.:Joint discussion paper series in economics 45-2011
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.
Subjects:general equilibrium
production possibility frontier
production set
international capital mobility
economic policy
JEL:A20
D50
E23
F11
F21
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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