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International capital mobility and structural transformation

Author

Listed:
  • Kim Kyungsoo

    (Department of Economics, Sungkyunkwan University, Seoul 03063, Korea)

  • Oh Wankeun

    (Department of Economics, Hankuk University of Foreign Studies, Seoul 024501, Korea)

  • Song E. Young

    (Department of Economics, Sogang University, Baekbeom-ro 35, Mapo-gu, Seoul 04107, Korea)

Abstract

This study examines the role of international capital mobility in shaping the relation between economic growth and structural transformation. We build a small open economy Ramsey model with two goods, tradables and nontradables. We show that if the long-run autarky interest rate of a small open economy is higher than the world interest rate, the employment and value-added shares of the tradables sector will rise over time. In the opposite case, the shares will fall. Because the autarky interest rate increases with the rate of technological progress, our result suggests that cross-country differences in the rate of technological progress may be a significant factor in accounting for diverse patterns of structural changes among countries.

Suggested Citation

  • Kim Kyungsoo & Oh Wankeun & Song E. Young, 2019. "International capital mobility and structural transformation," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(1), pages 1-11, January.
    • Handle: RePEc:bpj:bejmac:v:19:y:2019:i:1:p:11:n:5
    DOI: 10.1515/bejm-2017-0089
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    References listed on IDEAS

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    More about this item

    Keywords

    capital mobility; financial integration; industrialization; structural transformation; trade imbalance;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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