ABSTRACT
This chapter discusses a two-factor two-commodity variable production coefficient model. In this more general model the proportions in which capital and labour are used in the productive process in each sector may vary. Since production coefficients are allowed to vary, the general form of the production functions as specified in equations and apply in the present case. Thus, as labour becomes relatively more expensive compared with capital, the capital good becomes relatively more expensive if relative to the consumption goods industry more labour is employed in the capital goods industry. To discuss the growth process we need to add the equations for labour force growth and net capital formation. In this chapter the familiar two-sector neo-classical variable coefficient growth model has been briefly set out. The emphasis has been on some of the important properties of such a growth model as well as the underlying assumptions on which the results depend.
