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Growth, sectoral composition, and the evolution of income levels

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  • Alonso-Carrera, Jaime
  • Raurich, Xavier

Abstract

We assert that the endowments of production factors cause cross-country differences in GDP by generating disparities in the sectoral composition. We characterize the dynamic equilibrium of a two-sector endogenous growth model with several consumption goods that are subject to minimum consumption requirements. In this model, economies with the same fundamentals but different endowments of capitals will end up growing at a common rate, although the long run sectoral composition of GDP will be different. Because the total factor productivity (TFP) in multisector models depends on sectoral structure, these differences in capital endowments will also generate sustained differences in TFPs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 12 (December)
Pages: 2440-2460

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:12:p:2440-2460

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Keywords: Sectoral composition Two-sector growth model Minimum consumption Total factor productivity;

References

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Cited by:
  1. Marcelo Martinez & Montfort Mlachila, 2013. "The Quality of the Recent High-Growth Episode in Sub-Saharan Africa," IMF Working Papers 13/53, International Monetary Fund.
  2. Lorenzo Burlon, 2014. "Public expenditure distribution, voting, and growth," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 961, Bank of Italy, Economic Research and International Relations Area.

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