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The distribution approach to the aggregation of production functions(*)

Published online by Cambridge University Press:  17 August 2016

Joan Muysken
Joan Muysken*
Affiliation:
University of Limburg
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Extract

We shall argue below that the distribution approach to the aggregation of production functions provides an useful framework to analyse the production structure of an economy and enhances our understanding of it. The distribution approach was initiated by Houthakker (1956), elaborated by Johansen (1972) and extented by Sato (1975). Apart from summarising the main features of the distribution approach developed by these authors in a consistent framework, we also add new insights. Some of these insights stem from our earlier research, e.g. the interpretation of the aggregate short-run production function and the estimation of the capacity distribution. However, the extension of the analysis to economy-wide aggregation has not been presented before. The same holds for the role capital plays according to the distribution approach in both the short-run and in the long-run production function.

An important feature of the distribution approach is that the production structure of an economy is seen as the result of both management decisions and technological possibilities. Moreover, the approach enables us to identify production units and their production functions at any desired micro level. As a consequence, the influence of technological change on the production structure can be analysed extensively. The same holds for changes in output prices and factor prices, through their influence on management decisions.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 53 , Issue 3 , September 1987 , pp. 269 - 282
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1987 

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Footnotes

(*)

The research for this paper started during a stay at the State University of New York at Buffalo, with financial support of the Netherlands Organization for the Advancement of Pure Research (Z.W.O.).

References

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