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Capital Deepening and Non-Balanced Economic Growth

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Author Info
Daron Acemoglu
Veronica Guerrieri () (MIT)

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Abstract

This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share (despite the equilibrium reallocation of capital and labor away from that sector). We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb- Douglas production functions in each sector. In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. Finally, we construct and analyze a model of “nonbalanced endogenous growth,†which extends these results to an economy with endogenous and directed technical change, and demonstrates that non-balanced technological progress can be an equilibrium phenomenon

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 207.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:207

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Related research
Keywords: capital deepening; endogenous growth; multi-sector growth; non-balanced;

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Find related papers by JEL classification:
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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Cited by:
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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!]
  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. Danyang Xie, 2008. "Technological Progress and the Urbanization Process," Contributions to Macroeconomics, Berkeley Electronic Press, vol. 8(1), pages 1547-1547. [Downloadable!] (restricted)
  4. George Bitros, 2008. "Why the structure of capital and the useful lives of its components matter: A test based on a model of Austrian descent," The Review of Austrian Economics, Springer, vol. 21(4), pages 301-328, December. [Downloadable!] (restricted)
  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)
    Other versions:
  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!]
  7. Yi Jin & Zhixiong Zeng, 2006. "Distribution services and economic growth," Economics Bulletin, Economics Bulletin, vol. 15(10), pages 1-6. [Downloadable!]
  8. L. Rachel Ngai & Roberto M. Samaniego, 2006. "An R&D-Based Model of Multi-Sector Growth," CEP Discussion Papers dp0762, Centre for Economic Performance, LSE. [Downloadable!]
  9. Benjamin N. Dennis & Talan Iscan, 2007. "Accounting for Structural Change: Evidence from Two Centuries of U.S. Data," Department of Economics at Dalhousie University working papers archive account7, Dalhousie, Department of Economics. [Downloadable!]
  10. Ngai, Liwa Rachel & Samaniego, Roberto, 2007. "On the Long run Determinants of Industry TFP Growth Rates," CEPR Discussion Papers 6408, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Enrique R. Casares, 2007. "Productivity, Structural Change in Employment and Economic Growth," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 22(2), pages 335-355. [Downloadable!]
  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!]
  13. Rabah Arezki & Reda Cherif & John Piotrowski, 2009. "Tourism Specialization and Economic Development : Evidence from the UNESCO World Heritage List," IMF Working Papers 09/176, International Monetary Fund. [Downloadable!]
  14. Evangelia Vourvachaki, 2005. "Information and Communication Technologies in a Multi-Sector Endogenous Growth Model," Money Macro and Finance (MMF) Research Group Conference 2005 10, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  15. 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!]
  16. Lopez, Ramon & Stocking, Andrew, 2009. "Bringing Growth Theory "Down to Earth"," Working Papers 48944, University of Maryland, Department of Agricultural and Resource Economics. [Downloadable!]
  17. Francisco J. Buera & Joseph Kaboski, 2008. "Scale and the origins of structural change," Working Paper Series WP-08-06, Federal Reserve Bank of Chicago. [Downloadable!]
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