On the Likelihood and Relevance of Reverse Capital Deepening

Dept. of Economics Working Paper No. 279

44 Pages Posted: 21 Nov 2000

See all articles by Fabio Petri

Fabio Petri

University of Siena - Department of Economics

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

Petri, Fabio, On the Likelihood and Relevance of Reverse Capital Deepening (February 2000). Dept. of Economics Working Paper No. 279, Available at SSRN: https://ssrn.com/abstract=234880 or http://dx.doi.org/10.2139/ssrn.234880

Fabio Petri (Contact Author)

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy
+39 05 77232615 (Phone)
+39 05 77232661 (Fax)

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