TY  - JOUR
AU  - Krishna,Kala
AU  - Thursby,Marie
TI  - Structural Flexibility: A Partial Ordering
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4615
PY  - 1994
Y2  - January 1994
UR  - http://www.nber.org/papers/w4615
L1  - http://www.nber.org/papers/w4615.pdf
N1  - Author contact info:
Kala Krishna
Department of Economics
523 Kern Graduate Building
The Pennsylvania State University
University Park, PA 16802
Tel: 814/865-1106
Fax: 814/863-4775
E-Mail: kmk4@psu.edu

Marie C. Thursby
College of Management
Georgia Institute of Technology
800 West Peachtree Street, NW
Atlanta, GA 30308-1149
Tel: 404/894-6249
Fax: 404/385-4894
E-Mail: marie.thursby@mgt.gatech.edu
AB  - We use an approach developed by Krishna and Young to examine the ability of economies to adjust to exogenous shocks.  While, in general, economies cannot be ranked in terms of their flexibility, we provide a partial ordering for certain types of economies.  In particular, properties of the revenue function are used to show that placing restrictions on factor mobility and on production in certain sectors reduces the flexibility of a small open economy with respect to all price, endowment, and technology shocks of small enough magnitude.  Since one can think of these restrictions as distortions, we would expect them to reduce the level of GNP in the economy.  The insight provided by the analysis of flexibility is that, not only is the level of GNP affected, but also the intrinsic ability of the economy to adjust to shocks is reduced.
ER  -