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A Model Of Unbalanced Sectorial Growth With Application To Transition Economies

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  • Lilia Maliar

    ()
    (Universidad de Alicante)

  • Dmytro Kylymnyuk

    (Universidad de Alicante)

  • Serguei Maliar

    (Universidad de Alicante)

Abstract

This paper studies the implications of a dynamic general equilibrium model with three production sectors, which are agriculture, industry and services. Due to the assumption of increasing returns in industry and services, our model has multiple equilibria. Two equilibria are stable: one, in which a country produces only agricultural goods and converges to a steady state, and the other, in which a country operates all three sectors and has positive unbalanced long-run growth by contracting agriculture and expanding industry and services. These predictions agree well with the real-world development experiences of rich and poor countries. In the context of our model, we also investigate the evolution of the sectorial composition in the transition countries and find that such countries move to the rich rather than to the poor world.

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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-26.

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Length: 33 pages
Date of creation: Sep 2005
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2005-26

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Keywords: Growth model; Increasing returns to scale; Agriculture; Industry; Services; Multiple equilibria; Transition economies;

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  1. Kemp, Murray C & Schweinberger, Albert G, 1991. "Variable Returns to Scale, Non-uniqueness of Equilibrium and the Gains from International Trade," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 807-16, July.
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  13. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  14. Guillo, Maria Dolores & Perez-Sebastian, Fidel, 2007. "The curse and blessing of fixed specific factors in small-open economies," Journal of Development Economics, Elsevier, vol. 82(1), pages 58-78, January.
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