An Empirical Analysis of the Disproportionality Theory of Crisis: A Sraffian Approach to the Economic Crisis
An Empirical Analysis of the Disproportionality Theory of Crisis: A Sraffian Approach to the Economic Crisis

Summary/Abstract: Sraffian economics posits that the production prices are uniquely determined within a specific production framework, serving as the benchmark for maintaining economic reproduction. This study aims to link deviations between Sraffian production prices and market prices to economic disproportionality and investigate these divergences to understand the business cycle. Using input-output matrices of the Korean economy, the study computes these deviations using the Steedman and Tomkins (1998) formula. It then assesses the impact of these price changes on economic activity. VAR methodology analysis shows that increasing deviation, indicating disproportionality, negatively affects effective demand in Korea. These findings support Hilferding’s (1981) argument that deviations of market prices from labour value (or production price) signal an impending economic crisis. Finally, the research highlights the role of fixed capital, drawing on the crisis theory of Maksakovsky and Tugan-Baranovsky.

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