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Demand-based structural change and balanced economic growth

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  • Jaime Alonso-Carrera

    ()
    (Universidade de Vigo)

  • Xavier Raurich

    ()
    (Facultat d'Economia i Empresa; Universitat de Barcelona (UB))

Abstract

We analyze the equilibrium of a multi-sector exogenous growth model where the introduction of minimum consumption requirements drives structural change. We show that equilibrium dynamics simultaneously exhibt structural change and balanced growth of aggregate variables as is observed in US when the initial intensity of minimum consumption requirements is sufficiently small. This intensity is measured by the ratio between the aggregate value of the minimum consumption requirements and GDP and, therefore, it is inversely related with the level of economic development. Initially rich economies benefit from an initially low intensity of the minimum consumption requirements and, as aconsequence, these economies end up exhibiting balanced growth of aggregate variables, while there is structural change. In contrast, initially poor economie ssuffer from an initially large intensity of the minimum consumption requirements, which makes the growth of the aggregate variables unbalanced during a very large perid.These economies may never exhibit simultaneously balanced growth of aggregate variables and structural change

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Bibliographic Info

Paper provided by Universitat de Barcelona, Facultat d'Economia i Empresa, UB Economics in its series UB Economics Working Papers with number 2014/303.

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Length: 27 pages
Date of creation: 2014
Date of revision:
Handle: RePEc:ewp:wpaper:303web

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Keywords: Structural change; non-homothetic preferences; Balanced growth; Speed of convergence.;

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  1. 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.
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  3. Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-89, December.
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  7. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," 2006 Meeting Papers 207, Society for Economic Dynamics.
  8. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
  9. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
  10. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
  11. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  12. Hyeok Jeong & Yong Kim, 2006. "S-Shaped Transition and Catapult Effects," 2006 Meeting Papers 250, Society for Economic Dynamics.
  13. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
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