Proportions, Growth and Cycles between Constant and Non-Constant Returns to Scale

One of the main features which characterizes current production processes is that of non-constant returns to scale. While this feature is generally accepted in theoretical analysis, it fails to generate any effective applied instruments for multi-sectoral modelling. This fact may be due to the popularity of the constant returns to scale hypothesis, and in particular to the high reputation of the Leontief assumptions. In fact, these provide both an operational framework for production accounts and a clear-cut derivation of sectoral input requirements functions from actual data. Nevertheless, they also induce the erroneous view that a dynamic multisectoral model is explosive (i.e. highly unstable) outside its balanced growth path. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.