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Supply Side Structural Change

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  • Cordoba, Juan

    (Rice U)

Abstract

Growing economies often exhibit constant growth rates, constant interest rates, and an increasing urban share of their population. We show that the equilibrium path triggered by a capital-biased technological revolution can account for these regularities. This type of technological change can generate an aggregate production function that displays linear segments. As the economy moves along those segments, the interest rate and the growth rate are constant, and labor is gradually reallocated from the old (rural) techniques to the new (urban) techniques. The model predicts that developed countries must experience a sudden slowdown in their growth rates once their structural change is completed. Productivity, as measured by the Solow residuals, also displays a growth slowdown. Cross-country evidence supports these predictions of the model.

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Bibliographic Info

Paper provided by Rice University, Department of Economics in its series Working Papers with number 2002-01.

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Date of creation: Jan 2002
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Handle: RePEc:ecl:riceco:2002-01

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  1. Dan Ben-David & David H. Papell, 1998. "Slowdowns And Meltdowns: Postwar Growth Evidence From 74 Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 561-571, November.
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  7. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, vol. 85(1), pages 116-33, March.
  8. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-31, September.
  9. Atkinson, Anthony B & Stiglitz, Joseph E, 1969. "A New View of Technological Change," Economic Journal, Royal Economic Society, vol. 79(315), pages 573-78, September.
  10. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  11. Lucas, Robert E, Jr, 1970. "Capacity, Overtime, and Empirical Production Functions," American Economic Review, American Economic Association, vol. 60(2), pages 23-27, May.
  12. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
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