Full text: Study week on the econometric approach to development planning

which shows the value of the change in capacity net output, 
py, divided into a part due to labour, wil, and a part due 
to capital, »* v*; or as 
(IV. 10) 
A: — (pAy 
which shows the change in employment, Al, as equal to the 
value of the change in capacity net output, py, minus the part 
due to capital, #* v*, all divided by the wage rate, w. As 
described in [5], estimates can be made of the terms on the 
right-hand side of (IV. 19) over a future period, and this enab- 
les us to calculate Al for the different industry groups. 
On this basis, the initial stock oi assets required in 1970 
is determined by capital-output ratios. The allocation of labour 
to the different industries (1) is such that the labour force ex- 
pected to be available is fully used and (2) implies that the 
initial rates of return (or pay-off periods) are the same as, 
or related to, those observed in an earlier period. The required 
changes in labour productivity in the different industries emerge 
from these calculations and average out to the productivity 
implied by the total increase in output and the total labour 
The results obtained by this method are based on less in- 
formation than would be supplied by production functions. As 
a consequence they are provisional and are certainly not de- 
monstrably achievable. They do, however, provide a ground 
for discussion with individual industries until we have deve: 
loped our production functions. 
b) The price circuit. At the moment, prices enter expli- 
city into the model only as determinants of the composition of 
private consumption, government consumption being treated 
in a simpler wav indicated in section 4 below Many of the 
1] Stone - pag. 40

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