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Compare and contrast the Uzawa two-sector growth model with the Feldman model.

There are differences in the basic assumptions on which both the models have been constructed. Therefore there is also a difference between their outcomes and implications. Following are the differences in the assumptions of the two models:

1.Uzawa model assumes that there is one single capital good which is used in both the sectors as an input. Say for example, the economy produces ‘Corn’ in one sector using tractors and labour and ‘tractors’ in other sector using tractors and labour. However, the Feldman model assumes that the economy is divided into two sectors such that sector A produces capital goods and these capital goods can be used in either sector but once installed they can’t be shifted form one sector to another.

2. The Feldman model assumes that production is carried out in both the sectors with fixed coefficients technology and Uzawa assumed that labour and capital are shiftable from one sector to anther without any cost as such and instantaneously.

3. Uzawa model assumes that physical capital depreciates at a constant exponential rate 6. The Fredman Model claims that capital does not depreciate at all and hence capital is equal to investment.

4. The Fredman model also assumes that the economy is a closed economy however; Uzawa model is silent on it.

5. The Fredman model takes another assumption that production of goods in sector | 1s independent of production of goods in sector 2.

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