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Accumulation and Productivity Growth in Industrializing Economies

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  • John Landon-Lane

    ()
    (Rutgers University)

  • Peter Robertson

    ()
    (The University of New South Wales)

Abstract

Historically, episodes of rapid growth are accompanied by significant structural change. In this paper we therefore aim to quantify the extent to which factor accumulation induces structural change and productivity growth in industrializing economies. To fix ideas we present an extension of Barro, Mankiw and Sala-i-Martin's (1995) growth model that incorporates two sectors, traditional and modern, and an endogenous wage gap, due to efficiency wages. The model thus draws on ideas of Lewis (1954) and the dual economy literature. We quantify the model using a panel of 78 countries over the post war era. The results show that these labour reallocation effects can increase the effective return to physical capital by around 30% in many countries. We conclude that the productivity gains through labour re-allocation are potentially a significant contributing factor to transitional growth episodes in industrializing countries, and provide some examples.

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Bibliographic Info

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200305.

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Date of creation: 22 Feb 2003
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Handle: RePEc:rut:rutres:200305

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Keywords: growth; development; convergence; dual economy; productivity;

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Cited by:
  1. Jonathan Temple, 2010. "Aggregate production functions, growth economics, and the part-time tyranny of the identity: a reply to Felipe and McCombie," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(6), pages 685-692.
  2. Temple, Jonathan & Wößmann, Ludger, 2006. "Dualism and cross-country growth regressions," Munich Reprints in Economics 19619, University of Munich, Department of Economics.
  3. Celeste Amorim Varum & Bruno Cibrão, 2008. "On R&D, medium and high-tech industries and productivity: an application to the Portuguese case," Working Papers de Economia (Economics Working Papers) 51, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
  4. Jonathan Temple, 2006. "Aggregate Production Functions and Growth Economics," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 301-317.

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