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Capital Deepening and Nonbalanced Economic Growth

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Author Info
Daron Acemoglu
Veronica Guerrieri

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Abstract

We present a model of nonbalanced growth based on differences in factor proportions and capital deepening. Capital deepening increases the relative output of the more capital-intensive sector but simultaneously induces a reallocation of capital and labor away from that sector. Using a two-sector general equilibrium model, we show that nonbalanced growth is consistent with an asymptotic equilibrium with a constant interest rate and capital share in national income. For plausible parameter values, the model generates dynamics consistent with U.S. data, in particular, faster growth of employment and slower growth of output in less capital-intensive sectors, and aggregate behavior consistent with the Kaldor facts. (c) 2008 by The University of Chicago. All rights reserved..

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File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/589523
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 116 (2008)
Issue (Month): 3 (06)
Pages: 467-498
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Handle: RePEc:ucp:jpolec:v:116:y:2008:i:3:p:467-498

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  1. Arezki, Rabah & Cherif, Reda & Piotrowski, John, 2009. "Tourism Specialization and Economic Development: Evidence from the UNESCO World Heritage List," MPRA Paper 17132, University Library of Munich, Germany. [Downloadable!]
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  2. Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2009. "Endowment structures, industrial dynamics, and economic growth," Policy Research Working Paper Series 5055, The World Bank. [Downloadable!]
  3. repec:bep:maccon:v:8:y:2008:i:1:p:1547-1547 is not listed on IDEAS
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  5. Joseph K. Kaboski, 2009. "Education, Sectoral Composition and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 168-182, January. [Downloadable!] (restricted)
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  6. Karen Pittel & Lucas Bretschger, 2008. "Sectoral Heterogeneity, Resource Depletion, and Directed Technical Change: Theory and Policy," Economics working paper series 08/96, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  12. Catia Batista & Jacques Potin, 2007. "Stages of diversification and specialization in an Heckscher-Ohlin world, 1976-2000," Economics Series Working Papers 356, University of Oxford, Department of Economics. [Downloadable!]
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  14. Hernando Zuleta & Andrew T. Young, 2007. "Labor's Shares – Aggregate and Industry: Accounting for both in a model of unbalanced growth with induced innovation," DOCUMENTOS DE TRABAJO 003105, UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA. [Downloadable!]
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