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- Title
The Homogenization of Heterogeneous Inputs: Comment.
- Authors
Gunning, J. Patrick
- Abstract
In a recent article published in "The American Economic Review" (1981), James Buchanan and Robert Tollison used a truncated neoclassical model to deduce the allocational effects of forced equal-pay schemes, including equal pay for workers of the same trade, workers in the same firm or industry, workers who perform the same work, and the minimum wage. The model that Buchanan and Tollison used is one in which firms hire a single unit of each type of input, each may be hired in competitive markets where their prices differ, each has the same marginal physical product within the firm, and there is substitution within limits among inputs of different types. They also assume only human inputs, since they are interested in equal-pay schemes. The purpose of this comment is to show that, depending on their meaning of "substitution within limits," their model is either inconsistent or incorrectly specified. The key to understanding the Buchanan-Tollison model appears to lie with identifying a production function that corresponds to "substitution within limits."
- Subjects
EQUAL pay for equal work; MINIMUM wage; BUCHANAN, James, 1791-1868; WAGE payment systems; TOLLISON, Robert, 1942-2016; MARKETS; INCOME maintenance programs
- Publication
American Economic Review, 1984, Vol 74, Issue 4, p805
- ISSN
0002-8282
- Publication type
Article