Abdul Qayum

Endogenicity of economic growth models

Abstract In his celebrated 1956 article, “A Contribution to the Theory of Economic Growth,” Solow calibrated the stylized facts of economic growth observed in the Western developed countries and summed up by Kaldor. Solow reconciled steady-state rate of growth of per capita output with constant capital/output and capital/labor ratios by introducing labor augmenting technological progress and measuring physical labor time in efficiency units. A series of articles have appeared since the mid-1980s, which have substantially extended the neoclassical model of growth theory presented by Solow. Most of these are entitled endogenous in juxtaposition to Solows model, which is considered and often labeled exogenous. The purpose of this article is to show that this dichotomy is not worthwhile by arguing that the way technological progress enters in Solows model plays a crucial role. Moreover, the designation of a model need not depend on the way it employs just one element among others.

Inclusion of Environmental Goods in National Income Accounting

National income statistics take into account the values of market goods and completely ignore the environmental goods. The purpose of this paper is to suggest the integration of environmental goods into the framework of Leontiefs input–output analysis. It is suggested that environmental goods, such as clean air, fresh water, quiet, etc., be treated as sectors in the same way as market goods sectors. The final deliveries of the sectors may be positive, zero or negative, depending on the scarcity of the environ mental goods and political decisions. The paper gives a numerical illustration of how the environmental goods can be valued from an input–output analysis. It is recommended that a system should be devised to adjust the national income estimators of individual countries for the changes in the environmental goods caused by the economic activities of these countries.

Introduction of market prices in socialist countries

Abstract After a sudden and swift downfall of the communist governments and their command economies, the former socialist countries are engaged in transforming their centrally planned economies into decentralized free market economies. This transformation can be brought about in one major jump or in phased stages. The first alternative involves an abrupt change from a totally state-controlled economy to a fully free market economy and is fraught with grave risks of hyperinflation, mass unemployment, depletion of foreign exchange reserves, flight of capital, and exodus of skilled workers. The other alternative may allow the formerly socialist economies to avoid extreme forms of disruption and deprivation through a gradual relaxation of state-fixed prices and wages and transfer of state-owned factories and capital assets to private ownership. It has taken a great deal of planning for the institutions of command economies to get established over the last four to six decades; it will take a good deal of planning and implementation of economic policies to displace them.

Technical substitution of production factors through shadow pricing of factors

Abstract In underdeveloped countries, the market prices of factors do not reflect their economic opportunity cost, because of various market imperfections, state regulations, and population growth. Therefore, it is necessary that shadow prices of factors, instead of market prices of factors, should be used in the evaluation and selection of projects. Three alternative approaches to derive shadow prices have been outlined along with their shortcomings.