Paths of Development in Open Economies: The Role of Land
AbstractThis paper shows, within a Heckscher-Ohlin version of the two-sector neoclassical growth model, that land, besides having long-run effects, is also a main determinant of the speed of convergence toward the steady state when there are cross-sector capital share differences. This result stands in sharp contrast to the predictions of standard neoclassical growth frameworks, and calls for a reinterpretation of the conditional-convergence and the resource-curse findings. More specifically, the model predicts that the former finding requires the existence not only of diminishing returns but also of relatively small differences in capital shares across sectors. With respect to the latter finding, our results imply that it may be a consequence of purely transitional effects of natural riches on growth, and that it can not be interpreted as evidence that natural inputs necessarily harm long-run welfare. We produce empirical evidence on the relationship between land, income levels, and growth rates, and present data on cross-sector capital shares. We claim that most of that evidence is consistent with the predictions of the model.
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Bibliographic InfoPaper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 05-04.
Length: 37 pages
Date of creation: Mar 2005
Date of revision:
Other versions of this item:
- María D. Guilló & Fidel Perez-Sebastian, . "Paths of Development in Open Economies: The Role of Land," Working Papers on International Economics and Finance 05-04, FEDEA.
- Fidel Pérez Sebastián & María Dolores Guilló, 2005. "Paths Of Development In Open Economies: The Role Of Land," Working Papers. Serie AD 2005-31, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- O41 - Economic Development, 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
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