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Economic growth consequences of structural stagnation: A two-sector model of productive diversification

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  • Ortíz, Carlos Humberto

Abstract

ABSTRACT: The role of manufacturing input diversification is addressed in a two-sector model of endogenous growth. The general economic equilibrium is solved for the world. It is also solved for a small country with scant capital accumulation, low input diversification and high agricultural productivity. In this set up, developed economies lead the world structural transformation and achieve increasing growth rates by carrying out processes of productive diversification. For each country, the model yields that specialization may enhance economic development if factor prices are internationally equalized. However, due to terms of trade deterioration, factor prices are lower in underdeveloped economies. Hence, specialization of the small country according to its comparative advantages -structural stagnation- generates an inferior path of economic development (lower income and slower growth). RESUMEN: El rol de la diversificación de insumos manufactureros se aborda en un modelo de crecimiento endógeno de dos sectores. El equilibrio económico general se resuelve para el mundo. También es resuelto para un país pequeno con escasa acumulación de capital, baja diversificación de insumos y alta productividad agrícola. En este marco, los países desarrollados lideran la transformación estructural del mundo y alcanzan tasas ascendentes de crecimiento llevando a cabo procesos de diversificación productiva. Para cada país, el modelo arroja que la especialización puede mejorar el desarrollo económico si los precios de los factores están igualados internacionalmente. Sin embargo, debido al deterioro de los términos de intercambio, los precios de los factores son más bajos en los países subdesarrollados. De ahí que la especialización del país pequeno según sus ventajas comparativas –estancamiento estructural– genere una trayectoria inferior de desarrollo económico (con menor ingreso y menor crecimiento).

Suggested Citation

  • Ortíz, Carlos Humberto, 2013. "Economic growth consequences of structural stagnation: A two-sector model of productive diversification," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 78, pages 73-113, May.
    • Handle: RePEc:col:000174:014809
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    References listed on IDEAS

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    Cited by:

    1. Carlos Humberto Ortiz & Diana Marcela Jiménez & María Liliam Jaramillo, 2019. "Productive diversification and structural change in closed and open economies," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 91, pages 11-39, Julio - D.
    2. Ortiz, Carlos Humberto & Jiménez, Diana Marcela & Jaramillo, María Liliam, 2019. "Diversificación productiva y cambio estructural en economías cerradas y abiertas," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 91, pages 1-29, July.

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    More about this item

    Keywords

    Diversificación; especialización; profundización insumo-producto; estancamiento estructural; crecimiento económico;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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