Explain The Feldman --- Mahalanobis Model?


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Muhammad Abdullah786 Profile
G.A. Feldman was a Russian economist who wrote an article on the theory of NI growth which was published in the planned economy the journal of the Soviet state planning commission in 1928. His model of long run planning was translated by Domar in 1957.
In October 1952, Mahalanobis developed a single sector model based on the variables of NI and I. it was further developed in two sector models in 1953 where the entire net output of the economy was supposed to be produced in only two sectors, the investment goods sector and consumer goods sector.

Next he developed the famous 4 sector model in 1955. Both Feldman and Mahalanobis models are identical. Their combined model is a contrast to HD model. The main difference between two types of model lies in the fact that whereas a Keynesian flow analysis is accepted in HD model which emphasized that important bottlenecks can appear in the process of this type of transformation of savings into investment and as such the only way in which the such constraints can be released is to alter the structure of the economy in such a way as to allow the economic system to produce more capital goods to maintain a higher rate of investment. In the FM model it is assumed that there are real bottlenecks in the channeling of savings into investment which are ignored in HD, since the structural rigidities and the inter-temporal choice between present and future consumption benefits are ignored in HD model.
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Anonymous answered
The essence of Mahalanobis model lies in the fact that it demonstrates that though the rate of growth of the economy would get pulled down in the short run due to increase in the share of investment in the capital goods sector, in the long run the rate of growth of economy would increase with this larger share of investment in the capital goods sector. The model gave focus to the theme "machines to produce machines to produce machines", giving due direction to the utilisation of  scarce foreign exchange reserves for the upscaling of capacity in the economy.

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