Agnar Sandmo: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Abstract: In the late 1940s, Ragnar Frisch published two articles in Norwegian that constitute a pioneering attempt to apply welfare economics to a problem of economic policy. The main contention of the articles is that there exists a fundamental externality in the labour market because the marginal productivity of labour depends both on input in the individual unit and on total labour use in the economy. While inspired by the problems of postwar reconstruction, Frisch came to regard it as a general problem in a decentralized economy, and he explores its consequences for wage and tax policy. While Frisch attached great importance to the analysis, it has received little attention in the subsequent literature.
35 pages, January 23, 2017
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