Conceptually Based Measures of Structural Adaptability

Abstract

This paper provides definitions and measures of the extent of adaptability of an economy to exogenous changes in product prices, factor availability and technological change. It is argued that flexibility can in general only be defined relative to the exogenous changes that occur. Using a dual approach, measures of flexibility in response to the particular exogenous shock are developed. In addition, a decomposition of the total change in National Income into its component parts including gains due to flexibility or losses due to inflexibility is developed.