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Progressive services, asymptotically stagnant services, and manufacturing: Growth and structural change

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  • Kapur, Basant K.

Abstract

We present a model of structural change which, distinctively, sub-divides services (S) into ‘Progressive Services’ (PS) and ‘Asymptotically Stagnant Services’ (AS), to better reflect the advent of the New Economy. A manufacturing (M) sector is also included, and non-homothetic preferences assumed. An expanding-product-variety endogenous-growth framework is adopted, and partially overlapping input sets across the three (sub-)sectors assumed. The model endogenously generates different stages of growth: services which in due course become classified as progressive first overtake AS, and then M, in innovation-driven productivity growth, consistent with post-World-War-II US experience. The socially optimal growth pattern differs qualitatively from the private, and optimal, time-varying R&D subsidies are identified.

Suggested Citation

  • Kapur, Basant K., 2012. "Progressive services, asymptotically stagnant services, and manufacturing: Growth and structural change," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1322-1339.
    • Handle: RePEc:eee:dyncon:v:36:y:2012:i:9:p:1322-1339
    DOI: 10.1016/j.jedc.2012.03.002
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    Cited by:

    1. Stijepic, Denis & Wagner, Helmut, 2008. "Impacts of Intermediate Trade on Structural Change," MPRA Paper 40841, University Library of Munich, Germany, revised 23 Aug 2012.
    2. Marta C. N. Simões & Adelaide Duarte, 2013. "Human Capital and Growth in a Services Economy: the Case of Portugal," GEMF Working Papers 2013-21, GEMF, Faculty of Economics, University of Coimbra.
    3. Sasaki, Hiroaki, 2020. "Is growth declining in the service economy?," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 26-38.
    4. Basant Kapur, 2015. "A symmetric Heckscher–Ohlin model of endogenous growth," Journal of Economics, Springer, vol. 116(3), pages 183-209, November.
    5. Pedrosa Silva Duarte Maria Adelaide & Nunes Simões Marta Cristina, 2014. "Tertiarization and Human Capital: Do They Matter for Growth? Insights From Portugal," Scientific Annals of Economics and Business, Sciendo, vol. 61(1), pages 1-24, July.
    6. Marta C. N. Simões & Adelaide Duarte & João Sousa Andrade, 2019. "Human capital and productivity growth in a services economy: Some insights from the Portuguese case," International Economics and Economic Policy, Springer, vol. 16(3), pages 511-534, July.
    7. Wei-Bin Zhang, 2014. "Wealth and Income Distribution among Heterogeneous Households in a Neoclassical Growth Model with One Capital and Multiple Consumer Goods," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 48-61.

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    More about this item

    Keywords

    Progressive services; Information technology; Structural change; Endogenous growth; Non-homothetic preferences;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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