On the Likelihood and Relevance of Reverse Capital Deepening
Dept. of Economics Working Paper No. 279
44 Pages Posted: 21 Nov 2000
Date Written: February 2000
Abstract
The frequently voiced opinion that reswitching and reverse capital deepening are sufficiently improbable phenomena as to allow the economic theorist to assume that they cannot happen is criticised by 1) showing that D'Ippolito's calculations of the probability of reverse capital deepening are marred by a logical mistake and, when corrected, yield very high probabilities; 2) other methods of calculation of these probabilities all yield significantly high probabilities than D'Ippolito's; 3) The reasoning implicit in the importance attributed to the supposedly low likelihood of reverse capital deepening is anyway faulty.
JEL Classification: D00, D24
Suggested Citation: Suggested Citation