Faculty of Economics and Business Administration Publications Database

An Empirical Investigation of Paradoxes: Reswitching and Reverse Apital Deepening in Capital Theory

Han, Zonghie
Volume: 30
Number: 5
Pages: 737 - 765
Month: September
ISSN-Print: 0309-166X
Link External Source: Online Version
Year: 2006
Keywords: Cambridge Controversy; Reswitching; Reverse Capital Deepening; Linear Programming
Abstract: This paper examines the empirical relevance of the capital controversy. The price model of Sraffa and the dual models of the price and quantity systems of von Neumann become the basis of the investigation. In the course of the controversy, it proved easy to construct theoretical examples which contradicted the fundamental neoclassical hypothesis of an inverse capital demand function. This paper presents empirical examples for the first time. Thiry-two input-output tables from the OECD database serve as data. As a result, one envelope is found which involves reswitching. Reverse substitution of labour or reverse capital deepening are observed in about 3.65% of tested cases: they involve at least two switchpoints.