Note on reswitching and capital reversing

Abstract

It is well known that, in the context of a stationary economy, reswitching of techniques implies capital reversing and that capital reversing can occur without reswitching. The aim of this paper is to discuss these two conclusions in the context of an economy experiencing steady growth at an arbitrary feasible rate. Some implications for the production function and aggregate growth theory are drawn. The discussion is conducted within the framework of a fixed-coefficients, two-sector model (after Garegnani), the mainly geometrical argument being based on the wage curve and the consumption-growth curve.