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Unformatted text preview: consumption, production and labor input perfect markets consumption decisions do not affect production deci-sions, production is independent of household preferences and income home produced and purchased calories are perfect substitutes Result 1: Under perfect markets land only has an effect on calorie consumption via its eect on income. x c A = x c y y A when one or more market is incomplete then recursiveness breaks down consumption variables determine production (e.g., due to transaction costs or thin markets) Development Economics, LSE Summer School 2007 89...
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- Spring '10