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Cambridge Journal of Economics 28:99-120 (2004)
Cambridge Journal of Economics, Vol. 28, No. 1, © Cambridge Political Economy Society 2004; all rights reserved

The 40% neoclassical aggregate theory of production

Stefano Zambelli*

Address for correspondence: Department of Economics, Politics and Public Administration, Aalborg University, Fibigerstræde 1, 9220 Aalborg, Denmark; email: stefano{at}socsci.auc.dk

JEL classifications: E13, E11, A10, D24

The assumption that production in an economic system may be described by an aggregate neoclassical production function is at the heart of most modern equilibrium neoclassical business cycles and growth models. Its validity requires stringent assumptions on individual production functions and market structure. In this paper, the likelihood that an aggregate neoclassical production function could emerge from a simple heterogeneous production system is assessed by the use of computer simulations. The conclusion is that there exists a world of significant size for which the aggregate neoclassical theory of production does not hold.

Key Words: Neoclassical production functions • Growth theory • Capital controversy • Wage–profit frontier • Computational economics

Manuscript received October 2, 2000; final version received April 22, 2002.


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