Adelman, Irma, Sherman Robinson and World Bank. (1978). Income distribution policy in developing countries : a case study of Korea. Stanford, Calif.: Published for the World Bank [by] Stanford University Press.
This work begins by explicitly wanting to move the development debate away from a trickle-down economic approach to an approach that focuses more heavily on distribution.
“The model has five essential distinguishing features. It solves for prices endogenously in both factor and product markets. Its solution is based on achieving a measure of consistency among the results of individual optimizing behavior by a large number of actors…It incorporates income distribution, monetary phenomena, inflation, and foreign trade. It is dynamic, with imperfect intertemporal consistency. And, finally, it allows for varying principles of market clearing and institutional behavior” (3).
“The model operates by simulating the operation of factor and product markets with profit-maximizing firms and utility-maximizing households. It can thus be characterized as a computable general-equilibrium (CGE) model and is broadly in the neoclassical tradition, though it has a number of disequilibrium, non-neoclassical features. The overall model consists of a static, within-period adjustment model linked to a dynamic, intertemporal-adjustment model” (3).
“Basically, what differentiates our model from other multisectoral models is that it solves endogenously for wages and prices in a multifactor, multiconsumer, multiproduct world in which firm and consumer behavior is based on the optimization of separate objective functions. These features are emphasized in the simple CGE model” (19).
“The discussion of the model is organized around the activities of firms as buyers of factors and sellers of output and the activities of consumers as suppliers of factors and buyers of output. The circular flow identities which require that no income and no outputs be unaccounted for, is maintained in the model not only by production adjustments (as in other models), but also by price and factor income modifications. It is this feature that distinguishes CGE models from other economy-wide models” (20).
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